Correlation Between Zhejiang Publishing and Shenzhen Hans

Can any of the company-specific risk be diversified away by investing in both Zhejiang Publishing and Shenzhen Hans 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 Hans 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 Hans CNC, you can compare the effects of market volatilities on Zhejiang Publishing and Shenzhen Hans 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 Hans. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Publishing and Shenzhen Hans.

Diversification Opportunities for Zhejiang Publishing and Shenzhen Hans

0.46

Correlation Coefficient

Zhejiang Publishing  Shenzhen Hans

Very weak diversification

The 3 months correlation between Zhejiang and Shenzhen is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Publishing Media and Shenzhen Hans CNC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Hans CNC 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 Hans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Hans CNC has no effect on the direction of Zhejiang Publishing i.e., Zhejiang Publishing and Shenzhen Hans go up and down completely randomly.

Pair Corralation between Zhejiang Publishing and Shenzhen Hans

Assuming the 90 days trading horizon Zhejiang Publishing Media is expected to under-perform the Shenzhen Hans. In addition to that, Zhejiang Publishing is 1.06 times more volatile than Shenzhen Hans CNC. It trades about -0.01 of its total potential returns per unit of risk. Shenzhen Hans CNC is currently generating about 0.04 per unit of volatility. If you would invest  3,864  in Shenzhen Hans CNC on December 26, 2024 and sell it today you would earn a total of  159.00  from holding Shenzhen Hans CNC or generate 4.11% return on investment over 90 days.

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

Zhejiang Publishing Media  vs.  Shenzhen Hans CNC

Zhejiang Publishing Media

Risk-Adjusted Performance

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 somewhat strong basic indicators, Zhejiang Publishing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenzhen Hans CNC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Hans CNC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shenzhen Hans is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhejiang Publishing and Shenzhen Hans

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

The idea behind Zhejiang Publishing Media and Shenzhen Hans CNC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.