Correlation Between Dongxing Sec and Zhonghong Pulin

Can any of the company-specific risk be diversified away by investing in both Dongxing Sec and Zhonghong Pulin 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 Dongxing Sec and Zhonghong Pulin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dongxing Sec Co and Zhonghong Pulin Medical, you can compare the effects of market volatilities on Dongxing Sec and Zhonghong Pulin 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 Dongxing Sec with a short position of Zhonghong Pulin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongxing Sec and Zhonghong Pulin.

Diversification Opportunities for Dongxing Sec and Zhonghong Pulin

0.43

Correlation Coefficient

Dongxing Sec  Zhonghong Pulin

Very weak diversification

The 3 months correlation between Dongxing and Zhonghong is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dongxing Sec Co and Zhonghong Pulin Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhonghong Pulin Medical and Dongxing Sec 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 Dongxing Sec Co are associated (or correlated) with Zhonghong Pulin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhonghong Pulin Medical has no effect on the direction of Dongxing Sec i.e., Dongxing Sec and Zhonghong Pulin go up and down completely randomly.

Pair Corralation between Dongxing Sec and Zhonghong Pulin

Assuming the 90 days trading horizon Dongxing Sec Co is expected to generate 1.07 times more return on investment than Zhonghong Pulin. However, Dongxing Sec is 1.07 times more volatile than Zhonghong Pulin Medical. It trades about 0.09 of its potential returns per unit of risk. Zhonghong Pulin Medical is currently generating about -0.11 per unit of risk. If you would invest  1,119  in Dongxing Sec Co on December 10, 2024 and sell it today you would earn a total of  41.00  from holding Dongxing Sec Co or generate 3.66% return on investment over 90 days.

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

Dongxing Sec Co  vs.  Zhonghong Pulin Medical

Dongxing Sec

Risk-Adjusted Performance

Very Weak

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

Zhonghong Pulin Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhonghong Pulin Medical 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.

Pair Trading with Dongxing Sec and Zhonghong Pulin

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

The idea behind Dongxing Sec Co and Zhonghong Pulin Medical 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.