Correlation Between Zhengping RoadBridge and Western Mining

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

Diversification Opportunities for Zhengping RoadBridge and Western Mining

0.17

Correlation Coefficient

Zhengping RoadBridge  Western Mining

Average diversification

The 3 months correlation between Zhengping and Western is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Zhengping RoadBridge Constr and Western Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Mining 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 Western Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Mining has no effect on the direction of Zhengping RoadBridge i.e., Zhengping RoadBridge and Western Mining go up and down completely randomly.

Pair Corralation between Zhengping RoadBridge and Western Mining

Assuming the 90 days trading horizon Zhengping RoadBridge is expected to generate 5.36 times less return on investment than Western Mining. In addition to that, Zhengping RoadBridge is 2.23 times more volatile than Western Mining Co. It trades about 0.01 of its total potential returns per unit of risk. Western Mining Co is currently generating about 0.13 per unit of volatility. If you would invest  1,623  in Western Mining Co on December 27, 2024 and sell it today you would earn a total of  186.00  from holding Western Mining Co or generate 11.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Zhengping RoadBridge Constr  vs.  Western Mining Co

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.

Western Mining

Risk-Adjusted Performance

OK

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

Pair Trading with Zhengping RoadBridge and Western Mining

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

The idea behind Zhengping RoadBridge Constr and Western Mining 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.