Correlation Between Zhuzhou CRRC and Dazhong Transportation

Can any of the company-specific risk be diversified away by investing in both Zhuzhou CRRC and Dazhong Transportation 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 Dazhong Transportation 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 Dazhong Transportation Group, you can compare the effects of market volatilities on Zhuzhou CRRC and Dazhong Transportation 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 Dazhong Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhuzhou CRRC and Dazhong Transportation.

Diversification Opportunities for Zhuzhou CRRC and Dazhong Transportation

0.4

Correlation Coefficient

Zhuzhou CRRC  Dazhong Transportation

Very weak diversification

The 3 months correlation between Zhuzhou and Dazhong is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Zhuzhou CRRC Times and Dazhong Transportation Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dazhong Transportation 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 Dazhong Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dazhong Transportation has no effect on the direction of Zhuzhou CRRC i.e., Zhuzhou CRRC and Dazhong Transportation go up and down completely randomly.

Pair Corralation between Zhuzhou CRRC and Dazhong Transportation

Assuming the 90 days trading horizon Zhuzhou CRRC Times is expected to under-perform the Dazhong Transportation. But the stock apears to be less risky and, when comparing its historical volatility, Zhuzhou CRRC Times is 1.24 times less risky than Dazhong Transportation. The stock trades about -0.09 of its potential returns per unit of risk. The Dazhong Transportation Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Dazhong Transportation Group on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Dazhong Transportation Group or generate 0.0% return on investment over 90 days.

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

Zhuzhou CRRC Times  vs.  Dazhong Transportation Group

Zhuzhou CRRC Times

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhuzhou CRRC Times are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhuzhou CRRC sustained solid returns over the last few months and may actually be approaching a breakup point.

Dazhong Transportation

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dazhong Transportation Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dazhong Transportation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhuzhou CRRC and Dazhong Transportation

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

The idea behind Zhuzhou CRRC Times and Dazhong Transportation Group 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 CEOs Directory module to screen CEOs from public companies around the world.