Correlation Between Zhejiang Yongjin and Shenzhen Zhongzhuang

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

By analyzing existing cross correlation between Zhejiang Yongjin Metal and Shenzhen Zhongzhuang Construction, you can compare the effects of market volatilities on Zhejiang Yongjin and Shenzhen Zhongzhuang 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 Zhejiang Yongjin with a short position of Shenzhen Zhongzhuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Yongjin and Shenzhen Zhongzhuang.

Diversification Opportunities for Zhejiang Yongjin and Shenzhen Zhongzhuang

-0.09

Correlation Coefficient

Zhejiang Yongjin  Shenzhen Zhongzhuang

Good diversification

The 3 months correlation between Zhejiang and Shenzhen is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Yongjin Metal and Shenzhen Zhongzhuang Construct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Zhongzhuang and Zhejiang Yongjin 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 Zhejiang Yongjin Metal are associated (or correlated) with Shenzhen Zhongzhuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Zhongzhuang has no effect on the direction of Zhejiang Yongjin i.e., Zhejiang Yongjin and Shenzhen Zhongzhuang go up and down completely randomly.

Pair Corralation between Zhejiang Yongjin and Shenzhen Zhongzhuang

Assuming the 90 days trading horizon Zhejiang Yongjin Metal is expected to generate 0.55 times more return on investment than Shenzhen Zhongzhuang. However, Zhejiang Yongjin Metal is 1.8 times less risky than Shenzhen Zhongzhuang. It trades about 0.1 of its potential returns per unit of risk. Shenzhen Zhongzhuang Construction is currently generating about -0.05 per unit of risk. If you would invest  1,895  in Zhejiang Yongjin Metal on December 27, 2024 and sell it today you would earn a total of  186.00  from holding Zhejiang Yongjin Metal or generate 9.82% return on investment over 90 days.

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

Zhejiang Yongjin Metal  vs.  Shenzhen Zhongzhuang Construct

Zhejiang Yongjin Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Yongjin Metal are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Yongjin may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shenzhen Zhongzhuang

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Zhongzhuang Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Zhejiang Yongjin and Shenzhen Zhongzhuang

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

The idea behind Zhejiang Yongjin Metal and Shenzhen Zhongzhuang Construction 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.