Correlation Between Zhangjiagang Freetrade and Zhongshan Broad-Ocean

Can any of the company-specific risk be diversified away by investing in both Zhangjiagang Freetrade and Zhongshan Broad-Ocean 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 Zhangjiagang Freetrade and Zhongshan Broad-Ocean into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhangjiagang Freetrade Science and Zhongshan Broad Ocean Motor, you can compare the effects of market volatilities on Zhangjiagang Freetrade and Zhongshan Broad-Ocean 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 Zhangjiagang Freetrade with a short position of Zhongshan Broad-Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhangjiagang Freetrade and Zhongshan Broad-Ocean.

Diversification Opportunities for Zhangjiagang Freetrade and Zhongshan Broad-Ocean

-0.28

Correlation Coefficient

Zhangjiagang Freetrade  Zhongshan Broad-Ocean

Very good diversification

The 3 months correlation between Zhangjiagang and Zhongshan is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Zhangjiagang Freetrade Science and Zhongshan Broad Ocean Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongshan Broad Ocean and Zhangjiagang Freetrade 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 Zhangjiagang Freetrade Science are associated (or correlated) with Zhongshan Broad-Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongshan Broad Ocean has no effect on the direction of Zhangjiagang Freetrade i.e., Zhangjiagang Freetrade and Zhongshan Broad-Ocean go up and down completely randomly.

Pair Corralation between Zhangjiagang Freetrade and Zhongshan Broad-Ocean

Assuming the 90 days trading horizon Zhangjiagang Freetrade Science is expected to under-perform the Zhongshan Broad-Ocean. But the stock apears to be less risky and, when comparing its historical volatility, Zhangjiagang Freetrade Science is 2.08 times less risky than Zhongshan Broad-Ocean. The stock trades about -0.08 of its potential returns per unit of risk. The Zhongshan Broad Ocean Motor is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  609.00  in Zhongshan Broad Ocean Motor on December 29, 2024 and sell it today you would earn a total of  147.00  from holding Zhongshan Broad Ocean Motor or generate 24.14% return on investment over 90 days.

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

Zhangjiagang Freetrade Science  vs.  Zhongshan Broad Ocean Motor

Zhangjiagang Freetrade

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhangjiagang Freetrade Science 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.

Zhongshan Broad Ocean

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Broad Ocean Motor are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Broad-Ocean sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhangjiagang Freetrade and Zhongshan Broad-Ocean

The main advantage of trading using opposite Zhangjiagang Freetrade and Zhongshan Broad-Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhangjiagang Freetrade position performs unexpectedly, Zhongshan Broad-Ocean 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 Zhongshan Broad-Ocean will offset losses from the drop in Zhongshan Broad-Ocean's long position.

The idea behind Zhangjiagang Freetrade Science and Zhongshan Broad Ocean Motor 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.