Correlation Between Ming Yang and ZJBC Information

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

By analyzing existing cross correlation between Ming Yang Smart and ZJBC Information Technology, you can compare the effects of market volatilities on Ming Yang and ZJBC 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 Ming Yang with a short position of ZJBC Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ming Yang and ZJBC Information.

Diversification Opportunities for Ming Yang and ZJBC Information

0.85

Correlation Coefficient

Ming Yang  ZJBC Information

Very poor diversification

The 3 months correlation between Ming and ZJBC is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Ming Yang Smart and ZJBC Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZJBC Information Tec and Ming Yang 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 Ming Yang Smart are associated (or correlated) with ZJBC Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZJBC Information Tec has no effect on the direction of Ming Yang i.e., Ming Yang and ZJBC Information go up and down completely randomly.

Pair Corralation between Ming Yang and ZJBC Information

Assuming the 90 days trading horizon Ming Yang Smart is expected to under-perform the ZJBC Information. But the stock apears to be less risky and, when comparing its historical volatility, Ming Yang Smart is 1.68 times less risky than ZJBC Information. The stock trades about -0.22 of its potential returns per unit of risk. The ZJBC Information Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  243.00  in ZJBC Information Technology on September 30, 2024 and sell it today you would earn a total of  8.00  from holding ZJBC Information Technology or generate 3.29% return on investment over 90 days.

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

Ming Yang Smart  vs.  ZJBC Information Technology

Ming Yang Smart

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ming Yang Smart are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ming Yang sustained solid returns over the last few months and may actually be approaching a breakup point.

ZJBC Information Tec

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZJBC Information Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZJBC Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ming Yang and ZJBC Information

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

The idea behind Ming Yang Smart and ZJBC Information 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.