Correlation Between Dr Peng and Hangzhou Zhongya

Can any of the company-specific risk be diversified away by investing in both Dr Peng and Hangzhou Zhongya 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 Dr Peng and Hangzhou Zhongya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dr Peng Telecom and Hangzhou Zhongya Machinery, you can compare the effects of market volatilities on Dr Peng and Hangzhou Zhongya 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 Dr Peng with a short position of Hangzhou Zhongya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Peng and Hangzhou Zhongya.

Diversification Opportunities for Dr Peng and Hangzhou Zhongya

0.58

Correlation Coefficient

Dr Peng  Hangzhou Zhongya

Very weak diversification

The 3 months correlation between 600804 and Hangzhou is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dr Peng Telecom and Hangzhou Zhongya Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Zhongya Mac and Dr Peng 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 Dr Peng Telecom are associated (or correlated) with Hangzhou Zhongya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Zhongya Mac has no effect on the direction of Dr Peng i.e., Dr Peng and Hangzhou Zhongya go up and down completely randomly.

Pair Corralation between Dr Peng and Hangzhou Zhongya

Assuming the 90 days trading horizon Dr Peng Telecom is expected to generate 1.32 times more return on investment than Hangzhou Zhongya. However, Dr Peng is 1.32 times more volatile than Hangzhou Zhongya Machinery. It trades about 0.15 of its potential returns per unit of risk. Hangzhou Zhongya Machinery is currently generating about -0.09 per unit of risk. If you would invest  150.00  in Dr Peng Telecom on October 6, 2024 and sell it today you would earn a total of  61.00  from holding Dr Peng Telecom or generate 40.67% return on investment over 90 days.

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

Dr Peng Telecom  vs.  Hangzhou Zhongya Machinery

Dr Peng Telecom

Risk-Adjusted Performance

11 of 100

Good

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

Hangzhou Zhongya Mac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou Zhongya Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dr Peng and Hangzhou Zhongya

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

The idea behind Dr Peng Telecom and Hangzhou Zhongya Machinery 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.