Correlation Between Cambricon Technologies and Zhejiang Daily

Can any of the company-specific risk be diversified away by investing in both Cambricon Technologies and Zhejiang Daily 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 Zhejiang Daily 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 Zhejiang Daily Media, you can compare the effects of market volatilities on Cambricon Technologies and Zhejiang Daily 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 Zhejiang Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambricon Technologies and Zhejiang Daily.

Diversification Opportunities for Cambricon Technologies and Zhejiang Daily

-0.55

Correlation Coefficient

Cambricon Technologies  Zhejiang Daily

Excellent diversification

The 3 months correlation between Cambricon and Zhejiang is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cambricon Technologies Corp and Zhejiang Daily Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Daily Media 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 Zhejiang Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Daily Media has no effect on the direction of Cambricon Technologies i.e., Cambricon Technologies and Zhejiang Daily go up and down completely randomly.

Pair Corralation between Cambricon Technologies and Zhejiang Daily

Assuming the 90 days trading horizon Cambricon Technologies Corp is expected to generate 2.06 times more return on investment than Zhejiang Daily. However, Cambricon Technologies is 2.06 times more volatile than Zhejiang Daily Media. It trades about -0.03 of its potential returns per unit of risk. Zhejiang Daily Media is currently generating about -0.18 per unit of risk. If you would invest  64,875  in Cambricon Technologies Corp on October 23, 2024 and sell it today you would lose (3,053) from holding Cambricon Technologies Corp or give up 4.71% of portfolio value over 90 days.

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

Cambricon Technologies Corp  vs.  Zhejiang Daily Media

Cambricon Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cambricon Technologies Corp are ranked lower than 12 (%) 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.

Zhejiang Daily Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Daily Media 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 Cambricon Technologies and Zhejiang Daily

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

The idea behind Cambricon Technologies Corp and Zhejiang Daily Media 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.