Correlation Between Industrial and Zhengzhou Coal

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

Diversification Opportunities for Industrial and Zhengzhou Coal

0.62

Correlation Coefficient

Industrial  Zhengzhou Coal

Poor diversification

The 3 months correlation between Industrial and Zhengzhou is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining 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 Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of Industrial i.e., Industrial and Zhengzhou Coal go up and down completely randomly.

Pair Corralation between Industrial and Zhengzhou Coal

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.82 times more return on investment than Zhengzhou Coal. However, Industrial and Commercial is 1.21 times less risky than Zhengzhou Coal. It trades about 0.35 of its potential returns per unit of risk. Zhengzhou Coal Mining is currently generating about 0.13 per unit of risk. If you would invest  605.00  in Industrial and Commercial on September 23, 2024 and sell it today you would earn a total of  48.00  from holding Industrial and Commercial or generate 7.93% return on investment over 90 days.

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

Industrial and Commercial  vs.  Zhengzhou Coal Mining

Industrial and Commercial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhengzhou Coal Mining

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhengzhou Coal Mining are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhengzhou Coal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Zhengzhou Coal

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

The idea behind Industrial and Commercial and Zhengzhou Coal Mining 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.