Correlation Between Zhengzhou Coal and Emdoor Information

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

By analyzing existing cross correlation between Zhengzhou Coal Mining and Emdoor Information Co, you can compare the effects of market volatilities on Zhengzhou Coal and Emdoor 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 Zhengzhou Coal with a short position of Emdoor Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhengzhou Coal and Emdoor Information.

Diversification Opportunities for Zhengzhou Coal and Emdoor Information

0.36

Correlation Coefficient

Zhengzhou Coal  Emdoor Information

Weak diversification

The 3 months correlation between Zhengzhou and Emdoor is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Zhengzhou Coal Mining and Emdoor Information Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emdoor Information and Zhengzhou Coal 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 Zhengzhou Coal Mining are associated (or correlated) with Emdoor Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emdoor Information has no effect on the direction of Zhengzhou Coal i.e., Zhengzhou Coal and Emdoor Information go up and down completely randomly.

Pair Corralation between Zhengzhou Coal and Emdoor Information

Assuming the 90 days trading horizon Zhengzhou Coal Mining is expected to generate 0.49 times more return on investment than Emdoor Information. However, Zhengzhou Coal Mining is 2.04 times less risky than Emdoor Information. It trades about 0.13 of its potential returns per unit of risk. Emdoor Information Co is currently generating about 0.01 per unit of risk. If you would invest  1,320  in Zhengzhou Coal Mining on December 25, 2024 and sell it today you would earn a total of  192.00  from holding Zhengzhou Coal Mining or generate 14.55% return on investment over 90 days.

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

Zhengzhou Coal Mining  vs.  Emdoor Information Co

Zhengzhou Coal Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhengzhou Coal Mining are ranked lower than 9 (%) 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.

Emdoor Information

Risk-Adjusted Performance

Weak

Over the last 90 days Emdoor Information Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Emdoor Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhengzhou Coal and Emdoor Information

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

The idea behind Zhengzhou Coal Mining and Emdoor Information Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.