Correlation Between Zhejiang Yongjin and Beijing-Shanghai

Can any of the company-specific risk be diversified away by investing in both Zhejiang Yongjin and Beijing-Shanghai 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 Beijing-Shanghai 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 Beijing Shanghai High Speed, you can compare the effects of market volatilities on Zhejiang Yongjin and Beijing-Shanghai 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 Beijing-Shanghai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Yongjin and Beijing-Shanghai.

Diversification Opportunities for Zhejiang Yongjin and Beijing-Shanghai

0.0

Correlation Coefficient

Zhejiang Yongjin  Beijing-Shanghai

Pay attention - limited upside

The 3 months correlation between Zhejiang and Beijing-Shanghai is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Yongjin Metal and Beijing Shanghai High Speed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Shanghai High 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 Beijing-Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Shanghai High has no effect on the direction of Zhejiang Yongjin i.e., Zhejiang Yongjin and Beijing-Shanghai go up and down completely randomly.

Pair Corralation between Zhejiang Yongjin and Beijing-Shanghai

Assuming the 90 days trading horizon Zhejiang Yongjin Metal is expected to generate 1.87 times more return on investment than Beijing-Shanghai. However, Zhejiang Yongjin is 1.87 times more volatile than Beijing Shanghai High Speed. It trades about 0.1 of its potential returns per unit of risk. Beijing Shanghai High Speed is currently generating about -0.19 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	Flat
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Zhejiang Yongjin Metal  vs.  Beijing Shanghai High Speed

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.

Beijing Shanghai High

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijing Shanghai High Speed 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 Beijing-Shanghai

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

The idea behind Zhejiang Yongjin Metal and Beijing Shanghai High Speed 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.