Correlation Between Cathay Biotech and Zhejiang Zanyu

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

By analyzing existing cross correlation between Cathay Biotech and Zhejiang Zanyu Technology, you can compare the effects of market volatilities on Cathay Biotech and Zhejiang Zanyu 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 Cathay Biotech with a short position of Zhejiang Zanyu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Biotech and Zhejiang Zanyu.

Diversification Opportunities for Cathay Biotech and Zhejiang Zanyu

0.03

Correlation Coefficient

Cathay Biotech  Zhejiang Zanyu

Significant diversification

The 3 months correlation between Cathay and Zhejiang is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Biotech and Zhejiang Zanyu Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Zanyu Technology and Cathay Biotech 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 Cathay Biotech are associated (or correlated) with Zhejiang Zanyu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Zanyu Technology has no effect on the direction of Cathay Biotech i.e., Cathay Biotech and Zhejiang Zanyu go up and down completely randomly.

Pair Corralation between Cathay Biotech and Zhejiang Zanyu

Assuming the 90 days trading horizon Cathay Biotech is expected to under-perform the Zhejiang Zanyu. In addition to that, Cathay Biotech is 1.13 times more volatile than Zhejiang Zanyu Technology. It trades about -0.03 of its total potential returns per unit of risk. Zhejiang Zanyu Technology is currently generating about -0.01 per unit of volatility. If you would invest  1,186  in Zhejiang Zanyu Technology on October 4, 2024 and sell it today you would lose (201.00) from holding Zhejiang Zanyu Technology or give up 16.95% of portfolio value over 90 days.

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

Cathay Biotech  vs.  Zhejiang Zanyu Technology

Cathay Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zhejiang Zanyu Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Zanyu Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhejiang Zanyu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cathay Biotech and Zhejiang Zanyu

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

The idea behind Cathay Biotech and Zhejiang Zanyu Technology 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.