Correlation Between Industrial and Zhejiang Dahua

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

By analyzing existing cross correlation between Industrial and Commercial and Zhejiang Dahua Technology, you can compare the effects of market volatilities on Industrial and Zhejiang Dahua 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 Industrial with a short position of Zhejiang Dahua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Zhejiang Dahua.

Diversification Opportunities for Industrial and Zhejiang Dahua

-0.15

Correlation Coefficient

Industrial  Zhejiang Dahua

Good diversification

The 3 months correlation between Industrial and Zhejiang is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Zhejiang Dahua Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Dahua Technology and Industrial 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 Industrial and Commercial are associated (or correlated) with Zhejiang Dahua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Dahua Technology has no effect on the direction of Industrial i.e., Industrial and Zhejiang Dahua go up and down completely randomly.

Pair Corralation between Industrial and Zhejiang Dahua

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.52 times more return on investment than Zhejiang Dahua. However, Industrial and Commercial is 1.94 times less risky than Zhejiang Dahua. It trades about 0.1 of its potential returns per unit of risk. Zhejiang Dahua Technology is currently generating about -0.04 per unit of risk. If you would invest  472.00  in Industrial and Commercial on October 5, 2024 and sell it today you would earn a total of  199.00  from holding Industrial and Commercial or generate 42.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.67%
Values	Daily Returns

Industrial and Commercial  vs.  Zhejiang Dahua Technology

Industrial and Commercial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zhejiang Dahua Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Dahua Technology 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Industrial and Zhejiang Dahua

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

The idea behind Industrial and Commercial and Zhejiang Dahua Technology 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.