Correlation Between Changchun Engley and Zhejiang Qianjiang

Can any of the company-specific risk be diversified away by investing in both Changchun Engley and Zhejiang Qianjiang 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 Changchun Engley and Zhejiang Qianjiang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changchun Engley Automobile and Zhejiang Qianjiang Motorcycle, you can compare the effects of market volatilities on Changchun Engley and Zhejiang Qianjiang 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 Changchun Engley with a short position of Zhejiang Qianjiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun Engley and Zhejiang Qianjiang.

Diversification Opportunities for Changchun Engley and Zhejiang Qianjiang

-0.16

Correlation Coefficient

Changchun Engley  Zhejiang Qianjiang

Good diversification

The 3 months correlation between Changchun and Zhejiang is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Changchun Engley Automobile and Zhejiang Qianjiang Motorcycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Qianjiang and Changchun Engley 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 Changchun Engley Automobile are associated (or correlated) with Zhejiang Qianjiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Qianjiang has no effect on the direction of Changchun Engley i.e., Changchun Engley and Zhejiang Qianjiang go up and down completely randomly.

Pair Corralation between Changchun Engley and Zhejiang Qianjiang

Assuming the 90 days trading horizon Changchun Engley Automobile is expected to under-perform the Zhejiang Qianjiang. But the stock apears to be less risky and, when comparing its historical volatility, Changchun Engley Automobile is 1.06 times less risky than Zhejiang Qianjiang. The stock trades about -0.02 of its potential returns per unit of risk. The Zhejiang Qianjiang Motorcycle is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,430  in Zhejiang Qianjiang Motorcycle on October 10, 2024 and sell it today you would lose (542.00) from holding Zhejiang Qianjiang Motorcycle or give up 22.3% of portfolio value over 90 days.

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

Changchun Engley Automobile  vs.  Zhejiang Qianjiang Motorcycle

Changchun Engley Aut

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zhejiang Qianjiang

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Qianjiang Motorcycle are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Qianjiang may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Changchun Engley and Zhejiang Qianjiang

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

The idea behind Changchun Engley Automobile and Zhejiang Qianjiang Motorcycle 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.