Correlation Between Zhengzhou Coal and Guangxi Wuzhou

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

Diversification Opportunities for Zhengzhou Coal and Guangxi Wuzhou

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between Zhengzhou and Guangxi is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Zhengzhou Coal Mining and Guangxi Wuzhou Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangxi Wuzhou Commu 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 Guangxi Wuzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangxi Wuzhou Commu has no effect on the direction of Zhengzhou Coal i.e., Zhengzhou Coal and Guangxi Wuzhou go up and down completely randomly.

Pair Corralation between Zhengzhou Coal and Guangxi Wuzhou

Assuming the 90 days trading horizon Zhengzhou Coal is expected to generate 6.45 times less return on investment than Guangxi Wuzhou. But when comparing it to its historical volatility, Zhengzhou Coal Mining is 1.3 times less risky than Guangxi Wuzhou. It trades about 0.01 of its potential returns per unit of risk. Guangxi Wuzhou Communications is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  373.00  in Guangxi Wuzhou Communications on October 5, 2024 and sell it today you would earn a total of  106.00  from holding Guangxi Wuzhou Communications or generate 28.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Zhengzhou Coal Mining  vs.  Guangxi Wuzhou Communications

 Performance 
       Timeline  
Zhengzhou Coal Mining 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Guangxi Wuzhou Commu 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Guangxi Wuzhou Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangxi Wuzhou sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhengzhou Coal and Guangxi Wuzhou Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zhengzhou Coal and Guangxi Wuzhou

The main advantage of trading using opposite Zhengzhou Coal and Guangxi Wuzhou positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhengzhou Coal position performs unexpectedly, Guangxi Wuzhou 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 Guangxi Wuzhou will offset losses from the drop in Guangxi Wuzhou's long position.
The idea behind Zhengzhou Coal Mining and Guangxi Wuzhou Communications 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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