Correlation Between Zhengzhou Coal and Cinda Securities

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

Diversification Opportunities for Zhengzhou Coal and Cinda Securities

0.82

Correlation Coefficient

Zhengzhou Coal  Cinda Securities

Very poor diversification

The 3 months correlation between Zhengzhou and Cinda is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Zhengzhou Coal Mining and Cinda Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cinda Securities 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 Cinda Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cinda Securities has no effect on the direction of Zhengzhou Coal i.e., Zhengzhou Coal and Cinda Securities go up and down completely randomly.

Pair Corralation between Zhengzhou Coal and Cinda Securities

Assuming the 90 days trading horizon Zhengzhou Coal is expected to generate 1.99 times less return on investment than Cinda Securities. But when comparing it to its historical volatility, Zhengzhou Coal Mining is 1.2 times less risky than Cinda Securities. It trades about 0.03 of its potential returns per unit of risk. Cinda Securities Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,335  in Cinda Securities Co on October 2, 2024 and sell it today you would earn a total of  268.00  from holding Cinda Securities Co or generate 20.07% return on investment over 90 days.

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

Zhengzhou Coal Mining  vs.  Cinda Securities Co

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.

Cinda Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cinda Securities Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zhengzhou Coal and Cinda Securities

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

The idea behind Zhengzhou Coal Mining and Cinda Securities 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.