Correlation Between Chengdu B and Zhongyin Babi

Can any of the company-specific risk be diversified away by investing in both Chengdu B and Zhongyin Babi 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 Zhongyin Babi 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 Zhongyin Babi Food, you can compare the effects of market volatilities on Chengdu B and Zhongyin Babi 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 Zhongyin Babi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu B and Zhongyin Babi.

Diversification Opportunities for Chengdu B and Zhongyin Babi

0.78

Correlation Coefficient

Chengdu B  Zhongyin Babi

Poor diversification

The 3 months correlation between Chengdu and Zhongyin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu B ray Media and Zhongyin Babi Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongyin Babi Food 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 Zhongyin Babi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongyin Babi Food has no effect on the direction of Chengdu B i.e., Chengdu B and Zhongyin Babi go up and down completely randomly.

Pair Corralation between Chengdu B and Zhongyin Babi

Assuming the 90 days trading horizon Chengdu B ray Media is expected to under-perform the Zhongyin Babi. In addition to that, Chengdu B is 1.53 times more volatile than Zhongyin Babi Food. It trades about -0.02 of its total potential returns per unit of risk. Zhongyin Babi Food is currently generating about 0.01 per unit of volatility. If you would invest  1,675  in Zhongyin Babi Food on October 8, 2024 and sell it today you would lose (25.00) from holding Zhongyin Babi Food or give up 1.49% of portfolio value over 90 days.

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

Chengdu B ray Media  vs.  Zhongyin Babi Food

Chengdu B ray

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zhongyin Babi Food

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chengdu B and Zhongyin Babi

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

The idea behind Chengdu B ray Media and Zhongyin Babi Food 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.