Correlation Between Zhengping RoadBridge and Chongqing Road

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

By analyzing existing cross correlation between Zhengping RoadBridge Constr and Chongqing Road Bridge, you can compare the effects of market volatilities on Zhengping RoadBridge and Chongqing Road 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 Zhengping RoadBridge with a short position of Chongqing Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhengping RoadBridge and Chongqing Road.

Diversification Opportunities for Zhengping RoadBridge and Chongqing Road

0.06

Correlation Coefficient

Zhengping RoadBridge  Chongqing Road

Significant diversification

The 3 months correlation between Zhengping and Chongqing is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Zhengping RoadBridge Constr and Chongqing Road Bridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Road Bridge and Zhengping RoadBridge 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 Zhengping RoadBridge Constr are associated (or correlated) with Chongqing Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Road Bridge has no effect on the direction of Zhengping RoadBridge i.e., Zhengping RoadBridge and Chongqing Road go up and down completely randomly.

Pair Corralation between Zhengping RoadBridge and Chongqing Road

Assuming the 90 days trading horizon Zhengping RoadBridge Constr is expected to generate 1.66 times more return on investment than Chongqing Road. However, Zhengping RoadBridge is 1.66 times more volatile than Chongqing Road Bridge. It trades about 0.01 of its potential returns per unit of risk. Chongqing Road Bridge is currently generating about -0.03 per unit of risk. If you would invest  394.00  in Zhengping RoadBridge Constr on December 27, 2024 and sell it today you would lose (8.00) from holding Zhengping RoadBridge Constr or give up 2.03% of portfolio value over 90 days.

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

Zhengping RoadBridge Constr  vs.  Chongqing Road Bridge

Zhengping RoadBridge

Risk-Adjusted Performance

Very Weak

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

Chongqing Road Bridge

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Zhengping RoadBridge and Chongqing Road

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

The idea behind Zhengping RoadBridge Constr and Chongqing Road Bridge 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.