Correlation Between Zhen Ding and ITEQ Corp

Can any of the company-specific risk be diversified away by investing in both Zhen Ding and ITEQ Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Zhen Ding and ITEQ Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhen Ding Technology and ITEQ Corp, you can compare the effects of market volatilities on Zhen Ding and ITEQ Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Zhen Ding with a short position of ITEQ Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhen Ding and ITEQ Corp.

Diversification Opportunities for Zhen Ding and ITEQ Corp

0.71

Correlation Coefficient

Zhen Ding  ITEQ Corp

Poor diversification

The 3 months correlation between Zhen and ITEQ is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Zhen Ding Technology and ITEQ Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITEQ Corp and Zhen Ding is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Zhen Ding Technology are associated (or correlated) with ITEQ Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITEQ Corp has no effect on the direction of Zhen Ding i.e., Zhen Ding and ITEQ Corp go up and down completely randomly.

Pair Corralation between Zhen Ding and ITEQ Corp

Assuming the 90 days trading horizon Zhen Ding Technology is expected to under-perform the ITEQ Corp. But the stock apears to be less risky and, when comparing its historical volatility, Zhen Ding Technology is 1.34 times less risky than ITEQ Corp. The stock trades about -0.11 of its potential returns per unit of risk. The ITEQ Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  7,870  in ITEQ Corp on December 22, 2024 and sell it today you would lose (540.00) from holding ITEQ Corp or give up 6.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.25%
Values	Daily Returns

Zhen Ding Technology  vs.  ITEQ Corp

Zhen Ding Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhen Ding Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

ITEQ Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITEQ Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Zhen Ding and ITEQ Corp

The main advantage of trading using opposite Zhen Ding and ITEQ Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhen Ding position performs unexpectedly, ITEQ Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ITEQ Corp will offset losses from the drop in ITEQ Corp's long position.

The idea behind Zhen Ding Technology and ITEQ Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.