Correlation Between Kweichow Moutai and Zhongrun Resources

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

By analyzing existing cross correlation between Kweichow Moutai Co and Zhongrun Resources Investment, you can compare the effects of market volatilities on Kweichow Moutai and Zhongrun Resources 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 Kweichow Moutai with a short position of Zhongrun Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kweichow Moutai and Zhongrun Resources.

Diversification Opportunities for Kweichow Moutai and Zhongrun Resources

0.15

Correlation Coefficient

Kweichow Moutai  Zhongrun Resources

Average diversification

The 3 months correlation between Kweichow and Zhongrun is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and Zhongrun Resources Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongrun Resources and Kweichow Moutai 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 Kweichow Moutai Co are associated (or correlated) with Zhongrun Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongrun Resources has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and Zhongrun Resources go up and down completely randomly.

Pair Corralation between Kweichow Moutai and Zhongrun Resources

Assuming the 90 days trading horizon Kweichow Moutai is expected to generate 8.2 times less return on investment than Zhongrun Resources. But when comparing it to its historical volatility, Kweichow Moutai Co is 2.62 times less risky than Zhongrun Resources. It trades about 0.06 of its potential returns per unit of risk. Zhongrun Resources Investment is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  381.00  in Zhongrun Resources Investment on December 28, 2024 and sell it today you would earn a total of  156.00  from holding Zhongrun Resources Investment or generate 40.94% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  Zhongrun Resources Investment

Kweichow Moutai

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kweichow Moutai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhongrun Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongrun Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kweichow Moutai and Zhongrun Resources

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

The idea behind Kweichow Moutai Co and Zhongrun Resources Investment 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.