Correlation Between Zhejiang Publishing and Shenzhen Changfang

Can any of the company-specific risk be diversified away by investing in both Zhejiang Publishing and Shenzhen Changfang 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 Zhejiang Publishing and Shenzhen Changfang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Publishing Media and Shenzhen Changfang Light, you can compare the effects of market volatilities on Zhejiang Publishing and Shenzhen Changfang 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 Zhejiang Publishing with a short position of Shenzhen Changfang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Publishing and Shenzhen Changfang.

Diversification Opportunities for Zhejiang Publishing and Shenzhen Changfang

-0.1

Correlation Coefficient

Zhejiang Publishing  Shenzhen Changfang

Good diversification

The 3 months correlation between Zhejiang and Shenzhen is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Publishing Media and Shenzhen Changfang Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Changfang Light and Zhejiang Publishing 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 Zhejiang Publishing Media are associated (or correlated) with Shenzhen Changfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Changfang Light has no effect on the direction of Zhejiang Publishing i.e., Zhejiang Publishing and Shenzhen Changfang go up and down completely randomly.

Pair Corralation between Zhejiang Publishing and Shenzhen Changfang

Assuming the 90 days trading horizon Zhejiang Publishing Media is expected to under-perform the Shenzhen Changfang. But the stock apears to be less risky and, when comparing its historical volatility, Zhejiang Publishing Media is 1.68 times less risky than Shenzhen Changfang. The stock trades about -0.09 of its potential returns per unit of risk. The Shenzhen Changfang Light is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  159.00  in Shenzhen Changfang Light on October 26, 2024 and sell it today you would earn a total of  26.00  from holding Shenzhen Changfang Light or generate 16.35% return on investment over 90 days.

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

Zhejiang Publishing Media  vs.  Shenzhen Changfang Light

Zhejiang Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Publishing Media 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.

Shenzhen Changfang Light

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Changfang Light are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Changfang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Publishing and Shenzhen Changfang

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

The idea behind Zhejiang Publishing Media and Shenzhen Changfang Light 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.