Correlation Between CICC Fund and ZTE Corp

Can any of the company-specific risk be diversified away by investing in both CICC Fund and ZTE 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 CICC Fund and ZTE Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CICC Fund Management and ZTE Corp, you can compare the effects of market volatilities on CICC Fund and ZTE 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 CICC Fund with a short position of ZTE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CICC Fund and ZTE Corp.

Diversification Opportunities for CICC Fund and ZTE Corp

0.8

Correlation Coefficient

CICC Fund  ZTE Corp

Very poor diversification

The 3 months correlation between CICC and ZTE is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CICC Fund Management and ZTE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTE Corp and CICC Fund 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 CICC Fund Management are associated (or correlated) with ZTE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTE Corp has no effect on the direction of CICC Fund i.e., CICC Fund and ZTE Corp go up and down completely randomly.

Pair Corralation between CICC Fund and ZTE Corp

Assuming the 90 days trading horizon CICC Fund is expected to generate 1.85 times less return on investment than ZTE Corp. But when comparing it to its historical volatility, CICC Fund Management is 4.74 times less risky than ZTE Corp. It trades about 0.35 of its potential returns per unit of risk. ZTE Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,681  in ZTE Corp on October 25, 2024 and sell it today you would earn a total of  429.00  from holding ZTE Corp or generate 11.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

CICC Fund Management  vs.  ZTE Corp

CICC Fund Management

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CICC Fund Management are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CICC Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

ZTE Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZTE Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZTE Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CICC Fund and ZTE Corp

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

The idea behind CICC Fund Management and ZTE 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.