Correlation Between Chengdu B and Zoy Home

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

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

Diversification Opportunities for Chengdu B and Zoy Home

0.86

Correlation Coefficient

Chengdu B  Zoy Home

Very poor diversification

The 3 months correlation between Chengdu and Zoy is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu B ray Media 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 Chengdu B 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 Chengdu B ray Media 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 Chengdu B i.e., Chengdu B and Zoy Home go up and down completely randomly.

Pair Corralation between Chengdu B and Zoy Home

Assuming the 90 days trading horizon Chengdu B ray Media is expected to generate 0.9 times more return on investment than Zoy Home. However, Chengdu B ray Media is 1.11 times less risky than Zoy Home. It trades about 0.04 of its potential returns per unit of risk. Zoy Home Furnishing is currently generating about 0.01 per unit of risk. If you would invest  538.00  in Chengdu B ray Media on September 20, 2024 and sell it today you would earn a total of  184.00  from holding Chengdu B ray Media or generate 34.2% return on investment over 90 days.

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

Chengdu B ray Media  vs.  Zoy Home Furnishing

Chengdu B ray

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu B ray Media are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu B sustained solid returns over the last few months and may actually be approaching a breakup point.

Zoy Home Furnishing

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoy Home Furnishing are ranked lower than 15 (%) 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 Chengdu B and Zoy Home

The main advantage of trading using opposite Chengdu B and Zoy Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chengdu B 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 Chengdu B ray Media 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.