Correlation Between Zhen Ding and TWOWAY Communications

Can any of the company-specific risk be diversified away by investing in both Zhen Ding and TWOWAY Communications 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 TWOWAY Communications 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 TWOWAY Communications, you can compare the effects of market volatilities on Zhen Ding and TWOWAY Communications 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 TWOWAY Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhen Ding and TWOWAY Communications.

Diversification Opportunities for Zhen Ding and TWOWAY Communications

-0.36

Correlation Coefficient

Zhen Ding  TWOWAY Communications

Very good diversification

The 3 months correlation between Zhen and TWOWAY is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Zhen Ding Technology and TWOWAY Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TWOWAY Communications 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 TWOWAY Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TWOWAY Communications has no effect on the direction of Zhen Ding i.e., Zhen Ding and TWOWAY Communications go up and down completely randomly.

Pair Corralation between Zhen Ding and TWOWAY Communications

Assuming the 90 days trading horizon Zhen Ding Technology is expected to generate 0.51 times more return on investment than TWOWAY Communications. However, Zhen Ding Technology is 1.96 times less risky than TWOWAY Communications. It trades about -0.01 of its potential returns per unit of risk. TWOWAY Communications is currently generating about -0.24 per unit of risk. If you would invest  11,900  in Zhen Ding Technology on September 15, 2024 and sell it today you would lose (200.00) from holding Zhen Ding Technology or give up 1.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Zhen Ding Technology  vs.  TWOWAY Communications

Zhen Ding Technology

Risk-Adjusted Performance

0 of 100

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 fairly stable basic indicators, Zhen Ding is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

TWOWAY Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TWOWAY Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Zhen Ding and TWOWAY Communications

The main advantage of trading using opposite Zhen Ding and TWOWAY Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhen Ding position performs unexpectedly, TWOWAY Communications 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 TWOWAY Communications will offset losses from the drop in TWOWAY Communications' long position.

The idea behind Zhen Ding Technology and TWOWAY Communications 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.