Correlation Between Zhongtong Guomai and WuXi AppTec

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

Diversification Opportunities for Zhongtong Guomai and WuXi AppTec

0.46

Correlation Coefficient

Zhongtong Guomai  WuXi AppTec

Very weak diversification

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

Pair Corralation between Zhongtong Guomai and WuXi AppTec

Assuming the 90 days trading horizon Zhongtong Guomai is expected to generate 4.98 times less return on investment than WuXi AppTec. In addition to that, Zhongtong Guomai is 1.13 times more volatile than WuXi AppTec Co. It trades about 0.02 of its total potential returns per unit of risk. WuXi AppTec Co is currently generating about 0.13 per unit of volatility. If you would invest  5,551  in WuXi AppTec Co on December 26, 2024 and sell it today you would earn a total of  1,108  from holding WuXi AppTec Co or generate 19.96% return on investment over 90 days.

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

Zhongtong Guomai Communication  vs.  WuXi AppTec Co

Zhongtong Guomai Com

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongtong Guomai Communication are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhongtong Guomai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WuXi AppTec

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WuXi AppTec Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, WuXi AppTec sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhongtong Guomai and WuXi AppTec

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

The idea behind Zhongtong Guomai Communication and WuXi AppTec Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.