Correlation Between China Railway and Zimmer Biomet
Can any of the company-specific risk be diversified away by investing in both China Railway and Zimmer Biomet 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 China Railway and Zimmer Biomet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Railway Construction and Zimmer Biomet Holdings, you can compare the effects of market volatilities on China Railway and Zimmer Biomet 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 China Railway with a short position of Zimmer Biomet. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and Zimmer Biomet.
Diversification Opportunities for China Railway and Zimmer Biomet
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Zimmer is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and Zimmer Biomet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimmer Biomet Holdings and China Railway 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 China Railway Construction are associated (or correlated) with Zimmer Biomet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimmer Biomet Holdings has no effect on the direction of China Railway i.e., China Railway and Zimmer Biomet go up and down completely randomly.
Pair Corralation between China Railway and Zimmer Biomet
Assuming the 90 days horizon China Railway Construction is expected to under-perform the Zimmer Biomet. But the stock apears to be less risky and, when comparing its historical volatility, China Railway Construction is 2.43 times less risky than Zimmer Biomet. The stock trades about -0.13 of its potential returns per unit of risk. The Zimmer Biomet Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 9,444 in Zimmer Biomet Holdings on October 25, 2024 and sell it today you would earn a total of 1,166 from holding Zimmer Biomet Holdings or generate 12.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
China Railway Construction vs. Zimmer Biomet Holdings
Performance |
Timeline |
China Railway Constr |
Zimmer Biomet Holdings |
China Railway and Zimmer Biomet Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Railway and Zimmer Biomet
The main advantage of trading using opposite China Railway and Zimmer Biomet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway position performs unexpectedly, Zimmer Biomet 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 Zimmer Biomet will offset losses from the drop in Zimmer Biomet's long position.China Railway vs. Infrastrutture Wireless Italiane | China Railway vs. Shin Etsu Chemical Co | China Railway vs. X FAB Silicon Foundries | China Railway vs. Sanyo Chemical Industries |
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Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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