Correlation Between SYSTEMAIR and Zhongsheng Group

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

By analyzing existing cross correlation between SYSTEMAIR AB and Zhongsheng Group Holdings, you can compare the effects of market volatilities on SYSTEMAIR and Zhongsheng Group 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 SYSTEMAIR with a short position of Zhongsheng Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SYSTEMAIR and Zhongsheng Group.

Diversification Opportunities for SYSTEMAIR and Zhongsheng Group

0.58

Correlation Coefficient

SYSTEMAIR  Zhongsheng Group

Very weak diversification

The 3 months correlation between SYSTEMAIR and Zhongsheng is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SYSTEMAIR AB and Zhongsheng Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongsheng Group Holdings and SYSTEMAIR 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 SYSTEMAIR AB are associated (or correlated) with Zhongsheng Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongsheng Group Holdings has no effect on the direction of SYSTEMAIR i.e., SYSTEMAIR and Zhongsheng Group go up and down completely randomly.

Pair Corralation between SYSTEMAIR and Zhongsheng Group

Assuming the 90 days trading horizon SYSTEMAIR AB is expected to generate 0.49 times more return on investment than Zhongsheng Group. However, SYSTEMAIR AB is 2.05 times less risky than Zhongsheng Group. It trades about 0.05 of its potential returns per unit of risk. Zhongsheng Group Holdings is currently generating about 0.02 per unit of risk. If you would invest  448.00  in SYSTEMAIR AB on October 4, 2024 and sell it today you would earn a total of  327.00  from holding SYSTEMAIR AB or generate 72.99% return on investment over 90 days.

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

SYSTEMAIR AB  vs.  Zhongsheng Group Holdings

SYSTEMAIR AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SYSTEMAIR AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SYSTEMAIR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zhongsheng Group Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongsheng Group Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zhongsheng Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SYSTEMAIR and Zhongsheng Group

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

The idea behind SYSTEMAIR AB and Zhongsheng Group Holdings 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.