Correlation Between Shandong Publishing and Zoje Resources

Can any of the company-specific risk be diversified away by investing in both Shandong Publishing and Zoje Resources 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 Shandong Publishing and Zoje Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Publishing Media and Zoje Resources Investment, you can compare the effects of market volatilities on Shandong Publishing and Zoje Resources 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 Shandong Publishing with a short position of Zoje Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Publishing and Zoje Resources.

Diversification Opportunities for Shandong Publishing and Zoje Resources

0.6

Correlation Coefficient

Shandong Publishing  Zoje Resources

Poor diversification

The 3 months correlation between Shandong and Zoje is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Publishing Media and Zoje Resources Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoje Resources Investment and Shandong Publishing 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 Shandong Publishing Media are associated (or correlated) with Zoje Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoje Resources Investment has no effect on the direction of Shandong Publishing i.e., Shandong Publishing and Zoje Resources go up and down completely randomly.

Pair Corralation between Shandong Publishing and Zoje Resources

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the Zoje Resources. But the stock apears to be less risky and, when comparing its historical volatility, Shandong Publishing Media is 1.37 times less risky than Zoje Resources. The stock trades about -0.13 of its potential returns per unit of risk. The Zoje Resources Investment is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  258.00  in Zoje Resources Investment on December 26, 2024 and sell it today you would lose (19.00) from holding Zoje Resources Investment or give up 7.36% of portfolio value over 90 days.

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

Shandong Publishing Media  vs.  Zoje Resources Investment

Shandong Publishing Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Publishing Media 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zoje Resources Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zoje Resources Investment 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.

Pair Trading with Shandong Publishing and Zoje Resources

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

The idea behind Shandong Publishing Media and Zoje Resources 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.

Check out your portfolio center.

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.