Correlation Between Zhongzhu Medical and Jinsanjiang Silicon

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

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

Diversification Opportunities for Zhongzhu Medical and Jinsanjiang Silicon

0.58

Correlation Coefficient

Zhongzhu Medical  Jinsanjiang Silicon

Very weak diversification

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

Pair Corralation between Zhongzhu Medical and Jinsanjiang Silicon

Assuming the 90 days trading horizon Zhongzhu Medical Holdings is expected to under-perform the Jinsanjiang Silicon. But the stock apears to be less risky and, when comparing its historical volatility, Zhongzhu Medical Holdings is 1.41 times less risky than Jinsanjiang Silicon. The stock trades about -0.18 of its potential returns per unit of risk. The Jinsanjiang Silicon Material is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,163  in Jinsanjiang Silicon Material on October 4, 2024 and sell it today you would earn a total of  67.00  from holding Jinsanjiang Silicon Material or generate 5.76% return on investment over 90 days.

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

Zhongzhu Medical Holdings  vs.  Jinsanjiang Silicon Material

Zhongzhu Medical Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhongzhu Medical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Jinsanjiang Silicon

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jinsanjiang Silicon Material are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinsanjiang Silicon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhongzhu Medical and Jinsanjiang Silicon

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

The idea behind Zhongzhu Medical Holdings and Jinsanjiang Silicon Material 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.