Correlation Between Zhangjiagang Freetrade and Zhejiang Construction

Can any of the company-specific risk be diversified away by investing in both Zhangjiagang Freetrade and Zhejiang Construction 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 Zhejiang Construction 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 Zhejiang Construction Investment, you can compare the effects of market volatilities on Zhangjiagang Freetrade and Zhejiang Construction 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 Zhejiang Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhangjiagang Freetrade and Zhejiang Construction.

Diversification Opportunities for Zhangjiagang Freetrade and Zhejiang Construction

0.28

Correlation Coefficient

Zhangjiagang Freetrade  Zhejiang Construction

Modest diversification

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

Pair Corralation between Zhangjiagang Freetrade and Zhejiang Construction

Assuming the 90 days trading horizon Zhangjiagang Freetrade Science is expected to under-perform the Zhejiang Construction. But the stock apears to be less risky and, when comparing its historical volatility, Zhangjiagang Freetrade Science is 1.53 times less risky than Zhejiang Construction. The stock trades about -0.08 of its potential returns per unit of risk. The Zhejiang Construction Investment is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  900.00  in Zhejiang Construction Investment on December 29, 2024 and sell it today you would lose (48.00) from holding Zhejiang Construction Investment or give up 5.33% of portfolio value over 90 days.

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

Zhangjiagang Freetrade Science  vs.  Zhejiang Construction Investme

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.

Zhejiang Construction

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Zhangjiagang Freetrade and Zhejiang Construction

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

The idea behind Zhangjiagang Freetrade Science and Zhejiang Construction 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.