Correlation Between Industrial and Zhongfu Information

Can any of the company-specific risk be diversified away by investing in both Industrial and Zhongfu Information 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 Zhongfu Information 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 Zhongfu Information, you can compare the effects of market volatilities on Industrial and Zhongfu Information 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 Zhongfu Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Zhongfu Information.

Diversification Opportunities for Industrial and Zhongfu Information

-0.64

Correlation Coefficient

Industrial  Zhongfu Information

Excellent diversification

The 3 months correlation between Industrial and Zhongfu is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Zhongfu Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongfu Information 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 Zhongfu Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongfu Information has no effect on the direction of Industrial i.e., Industrial and Zhongfu Information go up and down completely randomly.

Pair Corralation between Industrial and Zhongfu Information

Assuming the 90 days trading horizon Industrial is expected to generate 3.14 times less return on investment than Zhongfu Information. But when comparing it to its historical volatility, Industrial and Commercial is 3.08 times less risky than Zhongfu Information. It trades about 0.07 of its potential returns per unit of risk. Zhongfu Information is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,229  in Zhongfu Information on October 26, 2024 and sell it today you would earn a total of  351.00  from holding Zhongfu Information or generate 28.56% return on investment over 90 days.

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

Industrial and Commercial  vs.  Zhongfu Information

Industrial and Commercial

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 10 (%) 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.

Zhongfu Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhongfu Information 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 Industrial and Zhongfu Information

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

The idea behind Industrial and Commercial and Zhongfu Information 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.