Correlation Between Sichuan Hebang and ZTE Corp

Can any of the company-specific risk be diversified away by investing in both Sichuan Hebang and ZTE Corp 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 Sichuan Hebang and ZTE Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sichuan Hebang Biotechnology and ZTE Corp, you can compare the effects of market volatilities on Sichuan Hebang and ZTE Corp 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 Sichuan Hebang with a short position of ZTE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Hebang and ZTE Corp.

Diversification Opportunities for Sichuan Hebang and ZTE Corp

-0.44

Correlation Coefficient

Sichuan Hebang  ZTE Corp

Very good diversification

The 3 months correlation between Sichuan and ZTE is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Hebang Biotechnology and ZTE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTE Corp and Sichuan Hebang 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 Sichuan Hebang Biotechnology are associated (or correlated) with ZTE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTE Corp has no effect on the direction of Sichuan Hebang i.e., Sichuan Hebang and ZTE Corp go up and down completely randomly.

Pair Corralation between Sichuan Hebang and ZTE Corp

Assuming the 90 days trading horizon Sichuan Hebang Biotechnology is expected to under-perform the ZTE Corp. But the stock apears to be less risky and, when comparing its historical volatility, Sichuan Hebang Biotechnology is 3.22 times less risky than ZTE Corp. The stock trades about -0.18 of its potential returns per unit of risk. The ZTE Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,809  in ZTE Corp on December 25, 2024 and sell it today you would lose (320.00) from holding ZTE Corp or give up 8.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Sichuan Hebang Biotechnology  vs.  ZTE Corp

Sichuan Hebang Biote

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sichuan Hebang Biotechnology 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ZTE Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZTE Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ZTE Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sichuan Hebang and ZTE Corp

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

The idea behind Sichuan Hebang Biotechnology and ZTE Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.