Correlation Between Zhejiang Publishing and Duzhe Publishing

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

Diversification Opportunities for Zhejiang Publishing and Duzhe Publishing

0.63

Correlation Coefficient

Zhejiang Publishing  Duzhe Publishing

Poor diversification

The 3 months correlation between Zhejiang and Duzhe is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Publishing Media and Duzhe Publishing Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duzhe Publishing Media 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 Duzhe Publishing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duzhe Publishing Media has no effect on the direction of Zhejiang Publishing i.e., Zhejiang Publishing and Duzhe Publishing go up and down completely randomly.

Pair Corralation between Zhejiang Publishing and Duzhe Publishing

Assuming the 90 days trading horizon Zhejiang Publishing is expected to generate 7.1 times less return on investment than Duzhe Publishing. But when comparing it to its historical volatility, Zhejiang Publishing Media is 1.01 times less risky than Duzhe Publishing. It trades about 0.01 of its potential returns per unit of risk. Duzhe Publishing Media is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  446.00  in Duzhe Publishing Media on October 22, 2024 and sell it today you would earn a total of  145.00  from holding Duzhe Publishing Media or generate 32.51% return on investment over 90 days.

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

Zhejiang Publishing Media  vs.  Duzhe Publishing Media

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.

Duzhe Publishing Media

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Duzhe Publishing Media are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Duzhe Publishing 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 Duzhe Publishing

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

The idea behind Zhejiang Publishing Media and Duzhe Publishing Media 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.