Correlation Between Zhongtong Guomai and Industrial

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

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

Diversification Opportunities for Zhongtong Guomai and Industrial

-0.72

Correlation Coefficient

Zhongtong Guomai  Industrial

Pay attention - limited upside

The 3 months correlation between Zhongtong and Industrial is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Zhongtong Guomai Communication and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial and Zhongtong Guomai 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 Zhongtong Guomai Communication are associated (or correlated) with Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Zhongtong Guomai i.e., Zhongtong Guomai and Industrial go up and down completely randomly.

Pair Corralation between Zhongtong Guomai and Industrial

Assuming the 90 days trading horizon Zhongtong Guomai Communication is expected to under-perform the Industrial. In addition to that, Zhongtong Guomai is 3.75 times more volatile than Industrial and Commercial. It trades about -0.07 of its total potential returns per unit of risk. Industrial and Commercial is currently generating about 0.16 per unit of volatility. If you would invest  613.00  in Industrial and Commercial on December 1, 2024 and sell it today you would earn a total of  74.00  from holding Industrial and Commercial or generate 12.07% return on investment over 90 days.

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

Zhongtong Guomai Communication  vs.  Industrial and Commercial

Zhongtong Guomai Com

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhongtong Guomai Communication 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.

Industrial and Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhongtong Guomai and Industrial

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

The idea behind Zhongtong Guomai Communication and Industrial and Commercial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.