Correlation Between Zhejiang Juhua and Malion New

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

By analyzing existing cross correlation between Zhejiang Juhua Co and Malion New Materials, you can compare the effects of market volatilities on Zhejiang Juhua and Malion New 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 Zhejiang Juhua with a short position of Malion New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Juhua and Malion New.

Diversification Opportunities for Zhejiang Juhua and Malion New

0.65

Correlation Coefficient

Zhejiang Juhua  Malion New

Poor diversification

The 3 months correlation between Zhejiang and Malion is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Juhua Co and Malion New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malion New Materials and Zhejiang Juhua 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 Zhejiang Juhua Co are associated (or correlated) with Malion New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malion New Materials has no effect on the direction of Zhejiang Juhua i.e., Zhejiang Juhua and Malion New go up and down completely randomly.

Pair Corralation between Zhejiang Juhua and Malion New

Assuming the 90 days trading horizon Zhejiang Juhua Co is expected to generate 0.7 times more return on investment than Malion New. However, Zhejiang Juhua Co is 1.43 times less risky than Malion New. It trades about 0.14 of its potential returns per unit of risk. Malion New Materials is currently generating about -0.28 per unit of risk. If you would invest  2,284  in Zhejiang Juhua Co on October 3, 2024 and sell it today you would earn a total of  128.00  from holding Zhejiang Juhua Co or generate 5.6% return on investment over 90 days.

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

Zhejiang Juhua Co  vs.  Malion New Materials

Zhejiang Juhua

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Juhua Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Juhua may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Malion New Materials

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Malion New Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Malion New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhejiang Juhua and Malion New

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

The idea behind Zhejiang Juhua Co and Malion New Materials 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.