Correlation Between Zhejiang Daily and China Galaxy

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

Diversification Opportunities for Zhejiang Daily and China Galaxy

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Zhejiang and China is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Daily Media and China Galaxy Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Galaxy Securities and Zhejiang Daily 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 Daily Media are associated (or correlated) with China Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Galaxy Securities has no effect on the direction of Zhejiang Daily i.e., Zhejiang Daily and China Galaxy go up and down completely randomly.

Pair Corralation between Zhejiang Daily and China Galaxy

Assuming the 90 days trading horizon Zhejiang Daily Media is expected to under-perform the China Galaxy. In addition to that, Zhejiang Daily is 1.09 times more volatile than China Galaxy Securities. It trades about -0.04 of its total potential returns per unit of risk. China Galaxy Securities is currently generating about -0.03 per unit of volatility. If you would invest  1,422  in China Galaxy Securities on October 15, 2024 and sell it today you would lose (90.00) from holding China Galaxy Securities or give up 6.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Zhejiang Daily Media  vs.  China Galaxy Securities

 Performance 
       Timeline  
Zhejiang Daily Media 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Zhejiang Daily Media 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.
China Galaxy Securities 

Risk-Adjusted Performance

0 of 100

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

Zhejiang Daily and China Galaxy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zhejiang Daily and China Galaxy

The main advantage of trading using opposite Zhejiang Daily and China Galaxy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhejiang Daily position performs unexpectedly, China Galaxy 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 China Galaxy will offset losses from the drop in China Galaxy's long position.
The idea behind Zhejiang Daily Media and China Galaxy Securities 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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