Correlation Between Zhejiang Orient and Xinjiang Tianrun

Can any of the company-specific risk be diversified away by investing in both Zhejiang Orient and Xinjiang Tianrun 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 Zhejiang Orient and Xinjiang Tianrun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Orient Gene and Xinjiang Tianrun Dairy, you can compare the effects of market volatilities on Zhejiang Orient and Xinjiang Tianrun 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 Zhejiang Orient with a short position of Xinjiang Tianrun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Orient and Xinjiang Tianrun.

Diversification Opportunities for Zhejiang Orient and Xinjiang Tianrun

0.43

Correlation Coefficient

Zhejiang Orient  Xinjiang Tianrun

Very weak diversification

The 3 months correlation between Zhejiang and Xinjiang is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Orient Gene and Xinjiang Tianrun Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Tianrun Dairy and Zhejiang Orient 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 Zhejiang Orient Gene are associated (or correlated) with Xinjiang Tianrun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Tianrun Dairy has no effect on the direction of Zhejiang Orient i.e., Zhejiang Orient and Xinjiang Tianrun go up and down completely randomly.

Pair Corralation between Zhejiang Orient and Xinjiang Tianrun

Assuming the 90 days trading horizon Zhejiang Orient Gene is expected to under-perform the Xinjiang Tianrun. But the stock apears to be less risky and, when comparing its historical volatility, Zhejiang Orient Gene is 1.59 times less risky than Xinjiang Tianrun. The stock trades about -0.12 of its potential returns per unit of risk. The Xinjiang Tianrun Dairy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  939.00  in Xinjiang Tianrun Dairy on September 26, 2024 and sell it today you would earn a total of  29.00  from holding Xinjiang Tianrun Dairy or generate 3.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Zhejiang Orient Gene  vs.  Xinjiang Tianrun Dairy

Zhejiang Orient Gene

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Orient Gene are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Orient may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Xinjiang Tianrun Dairy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Tianrun Dairy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Tianrun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Orient and Xinjiang Tianrun

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

The idea behind Zhejiang Orient Gene and Xinjiang Tianrun Dairy 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.

Check out your portfolio center.

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.