Correlation Between Zhengzhou Coal and King-Strong New

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

Diversification Opportunities for Zhengzhou Coal and King-Strong New

0.06

Correlation Coefficient

Zhengzhou Coal  King-Strong New

Significant diversification

The 3 months correlation between Zhengzhou and King-Strong is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Zhengzhou Coal Mining and King Strong New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Strong New 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 King-Strong New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Strong New has no effect on the direction of Zhengzhou Coal i.e., Zhengzhou Coal and King-Strong New go up and down completely randomly.

Pair Corralation between Zhengzhou Coal and King-Strong New

Assuming the 90 days trading horizon Zhengzhou Coal Mining is expected to generate 1.05 times more return on investment than King-Strong New. However, Zhengzhou Coal is 1.05 times more volatile than King Strong New Material. It trades about 0.22 of its potential returns per unit of risk. King Strong New Material is currently generating about 0.18 per unit of risk. If you would invest  1,259  in Zhengzhou Coal Mining on December 11, 2024 and sell it today you would earn a total of  239.00  from holding Zhengzhou Coal Mining or generate 18.98% return on investment over 90 days.

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

Zhengzhou Coal Mining  vs.  King Strong New Material

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.

King Strong New

Risk-Adjusted Performance

Very Weak

Over the last 90 days King Strong New Material 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 Zhengzhou Coal and King-Strong New

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

The idea behind Zhengzhou Coal Mining and King Strong New Material 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.