Correlation Between China Railway and Zhongtong Guomai

Can any of the company-specific risk be diversified away by investing in both China Railway and Zhongtong Guomai 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 China Railway and Zhongtong Guomai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Railway Construction and Zhongtong Guomai Communication, you can compare the effects of market volatilities on China Railway and Zhongtong Guomai 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 China Railway with a short position of Zhongtong Guomai. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and Zhongtong Guomai.

Diversification Opportunities for China Railway and Zhongtong Guomai

0.91

Correlation Coefficient

China Railway  Zhongtong Guomai

Almost no diversification

The 3 months correlation between China and Zhongtong is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Construction and Zhongtong Guomai Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongtong Guomai Com and China Railway 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 China Railway Construction are associated (or correlated) with Zhongtong Guomai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongtong Guomai Com has no effect on the direction of China Railway i.e., China Railway and Zhongtong Guomai go up and down completely randomly.

Pair Corralation between China Railway and Zhongtong Guomai

Assuming the 90 days trading horizon China Railway Construction is expected to generate 0.26 times more return on investment than Zhongtong Guomai. However, China Railway Construction is 3.91 times less risky than Zhongtong Guomai. It trades about -0.23 of its potential returns per unit of risk. Zhongtong Guomai Communication is currently generating about -0.07 per unit of risk. If you would invest  489.00  in China Railway Construction on December 2, 2024 and sell it today you would lose (77.00) from holding China Railway Construction or give up 15.75% of portfolio value over 90 days.

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

China Railway Construction  vs.  Zhongtong Guomai Communication

China Railway Constr

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Railway Construction 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zhongtong Guomai Com

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhongtong Guomai Communication 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Railway and Zhongtong Guomai

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

The idea behind China Railway Construction and Zhongtong Guomai Communication 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.