Correlation Between Wuhan Yangtze and Zhejiang Xiantong

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Can any of the company-specific risk be diversified away by investing in both Wuhan Yangtze and Zhejiang Xiantong 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 Wuhan Yangtze and Zhejiang Xiantong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wuhan Yangtze Communication and Zhejiang Xiantong RubberPlastic, you can compare the effects of market volatilities on Wuhan Yangtze and Zhejiang Xiantong 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 Wuhan Yangtze with a short position of Zhejiang Xiantong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wuhan Yangtze and Zhejiang Xiantong.

Diversification Opportunities for Wuhan Yangtze and Zhejiang Xiantong

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Wuhan and Zhejiang is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Wuhan Yangtze Communication and Zhejiang Xiantong RubberPlasti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Xiantong and Wuhan Yangtze 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 Wuhan Yangtze Communication are associated (or correlated) with Zhejiang Xiantong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Xiantong has no effect on the direction of Wuhan Yangtze i.e., Wuhan Yangtze and Zhejiang Xiantong go up and down completely randomly.

Pair Corralation between Wuhan Yangtze and Zhejiang Xiantong

Assuming the 90 days trading horizon Wuhan Yangtze Communication is expected to under-perform the Zhejiang Xiantong. In addition to that, Wuhan Yangtze is 2.1 times more volatile than Zhejiang Xiantong RubberPlastic. It trades about -0.35 of its total potential returns per unit of risk. Zhejiang Xiantong RubberPlastic is currently generating about -0.22 per unit of volatility. If you would invest  1,441  in Zhejiang Xiantong RubberPlastic on October 8, 2024 and sell it today you would lose (116.00) from holding Zhejiang Xiantong RubberPlastic or give up 8.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Wuhan Yangtze Communication  vs.  Zhejiang Xiantong RubberPlasti

 Performance 
       Timeline  
Wuhan Yangtze Commun 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Wuhan Yangtze Communication are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuhan Yangtze sustained solid returns over the last few months and may actually be approaching a breakup point.
Zhejiang Xiantong 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Zhejiang Xiantong RubberPlastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Wuhan Yangtze and Zhejiang Xiantong Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wuhan Yangtze and Zhejiang Xiantong

The main advantage of trading using opposite Wuhan Yangtze and Zhejiang Xiantong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wuhan Yangtze position performs unexpectedly, Zhejiang Xiantong 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 Zhejiang Xiantong will offset losses from the drop in Zhejiang Xiantong's long position.
The idea behind Wuhan Yangtze Communication and Zhejiang Xiantong RubberPlastic 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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