Correlation Between Cambricon Technologies and Zhongrun Resources

Can any of the company-specific risk be diversified away by investing in both Cambricon Technologies and Zhongrun Resources 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 Cambricon Technologies and Zhongrun Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cambricon Technologies Corp and Zhongrun Resources Investment, you can compare the effects of market volatilities on Cambricon Technologies and Zhongrun Resources 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 Cambricon Technologies with a short position of Zhongrun Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambricon Technologies and Zhongrun Resources.

Diversification Opportunities for Cambricon Technologies and Zhongrun Resources

0.79

Correlation Coefficient

Cambricon Technologies  Zhongrun Resources

Poor diversification

The 3 months correlation between Cambricon and Zhongrun is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cambricon Technologies Corp and Zhongrun Resources Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongrun Resources and Cambricon Technologies 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 Cambricon Technologies Corp are associated (or correlated) with Zhongrun Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongrun Resources has no effect on the direction of Cambricon Technologies i.e., Cambricon Technologies and Zhongrun Resources go up and down completely randomly.

Pair Corralation between Cambricon Technologies and Zhongrun Resources

Assuming the 90 days trading horizon Cambricon Technologies Corp is expected to generate 1.19 times more return on investment than Zhongrun Resources. However, Cambricon Technologies is 1.19 times more volatile than Zhongrun Resources Investment. It trades about 0.13 of its potential returns per unit of risk. Zhongrun Resources Investment is currently generating about 0.0 per unit of risk. If you would invest  12,700  in Cambricon Technologies Corp on October 5, 2024 and sell it today you would earn a total of  51,862  from holding Cambricon Technologies Corp or generate 408.36% return on investment over 90 days.

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

Cambricon Technologies Corp  vs.  Zhongrun Resources Investment

Cambricon Technologies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cambricon Technologies Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cambricon Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhongrun Resources

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongrun Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cambricon Technologies and Zhongrun Resources

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

The idea behind Cambricon Technologies Corp and Zhongrun Resources Investment 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.