Correlation Between Zhongyin Babi and Chengdu B-ray

Can any of the company-specific risk be diversified away by investing in both Zhongyin Babi and Chengdu B-ray 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 Zhongyin Babi and Chengdu B-ray into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhongyin Babi Food and Chengdu B ray Media, you can compare the effects of market volatilities on Zhongyin Babi and Chengdu B-ray 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 Zhongyin Babi with a short position of Chengdu B-ray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongyin Babi and Chengdu B-ray.

Diversification Opportunities for Zhongyin Babi and Chengdu B-ray

0.68

Correlation Coefficient

Zhongyin Babi  Chengdu B-ray

Poor diversification

The 3 months correlation between Zhongyin and Chengdu is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Zhongyin Babi Food and Chengdu B ray Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu B ray and Zhongyin Babi 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 Zhongyin Babi Food are associated (or correlated) with Chengdu B-ray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu B ray has no effect on the direction of Zhongyin Babi i.e., Zhongyin Babi and Chengdu B-ray go up and down completely randomly.

Pair Corralation between Zhongyin Babi and Chengdu B-ray

Assuming the 90 days trading horizon Zhongyin Babi Food is expected to generate 0.83 times more return on investment than Chengdu B-ray. However, Zhongyin Babi Food is 1.2 times less risky than Chengdu B-ray. It trades about 0.02 of its potential returns per unit of risk. Chengdu B ray Media is currently generating about -0.04 per unit of risk. If you would invest  1,776  in Zhongyin Babi Food on December 27, 2024 and sell it today you would earn a total of  28.00  from holding Zhongyin Babi Food or generate 1.58% return on investment over 90 days.

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

Zhongyin Babi Food  vs.  Chengdu B ray Media

Zhongyin Babi Food

Risk-Adjusted Performance

Weak

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

Chengdu B ray

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Zhongyin Babi and Chengdu B-ray

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

The idea behind Zhongyin Babi Food and Chengdu B ray Media 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.