Correlation Between Zhende Medical and Tongyu Communication

Can any of the company-specific risk be diversified away by investing in both Zhende Medical and Tongyu Communication 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 Zhende Medical and Tongyu Communication into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhende Medical Co and Tongyu Communication, you can compare the effects of market volatilities on Zhende Medical and Tongyu Communication 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 Zhende Medical with a short position of Tongyu Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhende Medical and Tongyu Communication.

Diversification Opportunities for Zhende Medical and Tongyu Communication

0.71

Correlation Coefficient

Zhende Medical  Tongyu Communication

Poor diversification

The 3 months correlation between Zhende and Tongyu is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Zhende Medical Co and Tongyu Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongyu Communication and Zhende Medical 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 Zhende Medical Co are associated (or correlated) with Tongyu Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongyu Communication has no effect on the direction of Zhende Medical i.e., Zhende Medical and Tongyu Communication go up and down completely randomly.

Pair Corralation between Zhende Medical and Tongyu Communication

Assuming the 90 days trading horizon Zhende Medical Co is expected to generate 0.67 times more return on investment than Tongyu Communication. However, Zhende Medical Co is 1.48 times less risky than Tongyu Communication. It trades about -0.03 of its potential returns per unit of risk. Tongyu Communication is currently generating about -0.23 per unit of risk. If you would invest  2,264  in Zhende Medical Co on September 25, 2024 and sell it today you would lose (22.00) from holding Zhende Medical Co or give up 0.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Zhende Medical Co  vs.  Tongyu Communication

Zhende Medical

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhende Medical Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhende Medical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tongyu Communication

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tongyu Communication are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongyu Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhende Medical and Tongyu Communication

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

The idea behind Zhende Medical Co and Tongyu Communication 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.