Correlation Between Beijing Kingsoft and Zoomlion Heavy

Can any of the company-specific risk be diversified away by investing in both Beijing Kingsoft and Zoomlion Heavy 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 Beijing Kingsoft and Zoomlion Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beijing Kingsoft Office and Zoomlion Heavy Industry, you can compare the effects of market volatilities on Beijing Kingsoft and Zoomlion Heavy 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 Beijing Kingsoft with a short position of Zoomlion Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Kingsoft and Zoomlion Heavy.

Diversification Opportunities for Beijing Kingsoft and Zoomlion Heavy

0.78

Correlation Coefficient

Beijing Kingsoft  Zoomlion Heavy

Poor diversification

The 3 months correlation between Beijing and Zoomlion is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Kingsoft Office and Zoomlion Heavy Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoomlion Heavy Industry and Beijing Kingsoft 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 Beijing Kingsoft Office are associated (or correlated) with Zoomlion Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoomlion Heavy Industry has no effect on the direction of Beijing Kingsoft i.e., Beijing Kingsoft and Zoomlion Heavy go up and down completely randomly.

Pair Corralation between Beijing Kingsoft and Zoomlion Heavy

Assuming the 90 days trading horizon Beijing Kingsoft Office is expected to generate 1.98 times more return on investment than Zoomlion Heavy. However, Beijing Kingsoft is 1.98 times more volatile than Zoomlion Heavy Industry. It trades about 0.01 of its potential returns per unit of risk. Zoomlion Heavy Industry is currently generating about -0.04 per unit of risk. If you would invest  31,400  in Beijing Kingsoft Office on September 24, 2024 and sell it today you would lose (1,090) from holding Beijing Kingsoft Office or give up 3.47% of portfolio value over 90 days.

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

Beijing Kingsoft Office  vs.  Zoomlion Heavy Industry

Beijing Kingsoft Office

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Kingsoft Office are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Kingsoft sustained solid returns over the last few months and may actually be approaching a breakup point.

Zoomlion Heavy Industry

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zoomlion Heavy Industry are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoomlion Heavy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Beijing Kingsoft and Zoomlion Heavy

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

The idea behind Beijing Kingsoft Office and Zoomlion Heavy Industry 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.