Correlation Between Zhengzhou Coal and Tjk Machinery

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

Diversification Opportunities for Zhengzhou Coal and Tjk Machinery

0.18

Correlation Coefficient

Zhengzhou Coal  Tjk Machinery

Average diversification

The 3 months correlation between Zhengzhou and Tjk is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Zhengzhou Coal Mining and Tjk Machinery Tianjin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tjk Machinery Tianjin 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 Tjk Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tjk Machinery Tianjin has no effect on the direction of Zhengzhou Coal i.e., Zhengzhou Coal and Tjk Machinery go up and down completely randomly.

Pair Corralation between Zhengzhou Coal and Tjk Machinery

Assuming the 90 days trading horizon Zhengzhou Coal is expected to generate 2.06 times less return on investment than Tjk Machinery. But when comparing it to its historical volatility, Zhengzhou Coal Mining is 1.84 times less risky than Tjk Machinery. It trades about 0.03 of its potential returns per unit of risk. Tjk Machinery Tianjin is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,073  in Tjk Machinery Tianjin on October 3, 2024 and sell it today you would earn a total of  228.00  from holding Tjk Machinery Tianjin or generate 21.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Zhengzhou Coal Mining  vs.  Tjk Machinery Tianjin

Zhengzhou Coal Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhengzhou Coal Mining 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.

Tjk Machinery Tianjin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tjk Machinery Tianjin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tjk Machinery 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 Tjk Machinery

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

The idea behind Zhengzhou Coal Mining and Tjk Machinery Tianjin 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.