Correlation Between Agricultural Bank and ZTE Corp

Can any of the company-specific risk be diversified away by investing in both Agricultural Bank and ZTE Corp 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 Agricultural Bank and ZTE Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Agricultural Bank of and ZTE Corp, you can compare the effects of market volatilities on Agricultural Bank and ZTE Corp 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 Agricultural Bank with a short position of ZTE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agricultural Bank and ZTE Corp.

Diversification Opportunities for Agricultural Bank and ZTE Corp

0.5

Correlation Coefficient

Agricultural Bank  ZTE Corp

Very weak diversification

The 3 months correlation between Agricultural and ZTE is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Agricultural Bank of and ZTE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTE Corp and Agricultural Bank 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 Agricultural Bank of are associated (or correlated) with ZTE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTE Corp has no effect on the direction of Agricultural Bank i.e., Agricultural Bank and ZTE Corp go up and down completely randomly.

Pair Corralation between Agricultural Bank and ZTE Corp

Assuming the 90 days trading horizon Agricultural Bank of is expected to generate 0.47 times more return on investment than ZTE Corp. However, Agricultural Bank of is 2.13 times less risky than ZTE Corp. It trades about 0.11 of its potential returns per unit of risk. ZTE Corp is currently generating about 0.04 per unit of risk. If you would invest  272.00  in Agricultural Bank of on September 24, 2024 and sell it today you would earn a total of  232.00  from holding Agricultural Bank of or generate 85.29% return on investment over 90 days.

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

Agricultural Bank of  vs.  ZTE Corp

Agricultural Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Agricultural Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Agricultural Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ZTE Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZTE Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZTE Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agricultural Bank and ZTE Corp

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

The idea behind Agricultural Bank of and ZTE Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.