Correlation Between Inspur Software and Zoy Home

Can any of the company-specific risk be diversified away by investing in both Inspur Software and Zoy Home 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 Inspur Software and Zoy Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Inspur Software Co and Zoy Home Furnishing, you can compare the effects of market volatilities on Inspur Software and Zoy Home 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 Inspur Software with a short position of Zoy Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspur Software and Zoy Home.

Diversification Opportunities for Inspur Software and Zoy Home

0.9

Correlation Coefficient

Inspur Software  Zoy Home

Almost no diversification

The 3 months correlation between Inspur and Zoy is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Inspur Software Co and Zoy Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoy Home Furnishing and Inspur Software 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 Inspur Software Co are associated (or correlated) with Zoy Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoy Home Furnishing has no effect on the direction of Inspur Software i.e., Inspur Software and Zoy Home go up and down completely randomly.

Pair Corralation between Inspur Software and Zoy Home

Assuming the 90 days trading horizon Inspur Software Co is expected to generate 1.51 times more return on investment than Zoy Home. However, Inspur Software is 1.51 times more volatile than Zoy Home Furnishing. It trades about 0.21 of its potential returns per unit of risk. Zoy Home Furnishing is currently generating about 0.21 per unit of risk. If you would invest  974.00  in Inspur Software Co on September 4, 2024 and sell it today you would earn a total of  583.00  from holding Inspur Software Co or generate 59.86% return on investment over 90 days.

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

Inspur Software Co  vs.  Zoy Home Furnishing

Inspur Software

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Inspur Software Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inspur Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Zoy Home Furnishing

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zoy Home Furnishing are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoy Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inspur Software and Zoy Home

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

The idea behind Inspur Software Co and Zoy Home Furnishing 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.