Correlation Between Chongqing Road and Zhongzhu Medical

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

By analyzing existing cross correlation between Chongqing Road Bridge and Zhongzhu Medical Holdings, you can compare the effects of market volatilities on Chongqing Road and Zhongzhu Medical 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 Chongqing Road with a short position of Zhongzhu Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Road and Zhongzhu Medical.

Diversification Opportunities for Chongqing Road and Zhongzhu Medical

0.58

Correlation Coefficient

Chongqing Road  Zhongzhu Medical

Very weak diversification

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

Pair Corralation between Chongqing Road and Zhongzhu Medical

Assuming the 90 days trading horizon Chongqing Road is expected to generate 1.04 times less return on investment than Zhongzhu Medical. In addition to that, Chongqing Road is 1.65 times more volatile than Zhongzhu Medical Holdings. It trades about 0.02 of its total potential returns per unit of risk. Zhongzhu Medical Holdings is currently generating about 0.04 per unit of volatility. If you would invest  131.00  in Zhongzhu Medical Holdings on October 3, 2024 and sell it today you would earn a total of  5.00  from holding Zhongzhu Medical Holdings or generate 3.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

Chongqing Road Bridge  vs.  Zhongzhu Medical Holdings

Chongqing Road Bridge

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Road Bridge are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chongqing Road is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhongzhu Medical Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongzhu Medical Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhongzhu Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chongqing Road and Zhongzhu Medical

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

The idea behind Chongqing Road Bridge and Zhongzhu Medical 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.