Correlation Between Zhuzhou CRRC and Qinghaihuading Industrial

Can any of the company-specific risk be diversified away by investing in both Zhuzhou CRRC and Qinghaihuading Industrial 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 Zhuzhou CRRC and Qinghaihuading Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhuzhou CRRC Times and Qinghaihuading Industrial Co, you can compare the effects of market volatilities on Zhuzhou CRRC and Qinghaihuading Industrial 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 Zhuzhou CRRC with a short position of Qinghaihuading Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhuzhou CRRC and Qinghaihuading Industrial.

Diversification Opportunities for Zhuzhou CRRC and Qinghaihuading Industrial

0.2

Correlation Coefficient

Zhuzhou CRRC  Qinghaihuading Industrial

Modest diversification

The 3 months correlation between Zhuzhou and Qinghaihuading is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Zhuzhou CRRC Times and Qinghaihuading Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qinghaihuading Industrial and Zhuzhou CRRC 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 Zhuzhou CRRC Times are associated (or correlated) with Qinghaihuading Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qinghaihuading Industrial has no effect on the direction of Zhuzhou CRRC i.e., Zhuzhou CRRC and Qinghaihuading Industrial go up and down completely randomly.

Pair Corralation between Zhuzhou CRRC and Qinghaihuading Industrial

Assuming the 90 days trading horizon Zhuzhou CRRC Times is expected to under-perform the Qinghaihuading Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Zhuzhou CRRC Times is 1.58 times less risky than Qinghaihuading Industrial. The stock trades about -0.14 of its potential returns per unit of risk. The Qinghaihuading Industrial Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  418.00  in Qinghaihuading Industrial Co on October 4, 2024 and sell it today you would lose (52.00) from holding Qinghaihuading Industrial Co or give up 12.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Zhuzhou CRRC Times  vs.  Qinghaihuading Industrial Co

Zhuzhou CRRC Times

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhuzhou CRRC Times 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.

Qinghaihuading Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qinghaihuading Industrial Co 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 Zhuzhou CRRC and Qinghaihuading Industrial

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

The idea behind Zhuzhou CRRC Times and Qinghaihuading Industrial Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.