Correlation Between Zhengzhou Coal and SI-TECH Information

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

Diversification Opportunities for Zhengzhou Coal and SI-TECH Information

0.28

Correlation Coefficient

Zhengzhou Coal  SI-TECH Information

Modest diversification

The 3 months correlation between Zhengzhou and SI-TECH is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Zhengzhou Coal Mining and SI TECH Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SI TECH 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 SI-TECH Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SI TECH Information has no effect on the direction of Zhengzhou Coal i.e., Zhengzhou Coal and SI-TECH Information go up and down completely randomly.

Pair Corralation between Zhengzhou Coal and SI-TECH Information

Assuming the 90 days trading horizon Zhengzhou Coal Mining is expected to generate 0.6 times more return on investment than SI-TECH Information. However, Zhengzhou Coal Mining is 1.67 times less risky than SI-TECH Information. It trades about 0.27 of its potential returns per unit of risk. SI TECH Information Technology is currently generating about 0.03 per unit of risk. If you would invest  1,289  in Zhengzhou Coal Mining on December 10, 2024 and sell it today you would earn a total of  196.00  from holding Zhengzhou Coal Mining or generate 15.21% 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.  SI TECH Information Technology

Zhengzhou Coal Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhengzhou Coal Mining are ranked lower than 10 (%) 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.

SI TECH Information

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SI TECH Information Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SI-TECH Information may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Zhengzhou Coal and SI-TECH Information

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

The idea behind Zhengzhou Coal Mining and SI TECH 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.