Correlation Between Everdisplay Optronics and Zhengzhou Coal

Can any of the company-specific risk be diversified away by investing in both Everdisplay Optronics and Zhengzhou Coal 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 Everdisplay Optronics and Zhengzhou Coal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Everdisplay Optronics Shanghai and Zhengzhou Coal Mining, you can compare the effects of market volatilities on Everdisplay Optronics and Zhengzhou Coal 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 Everdisplay Optronics with a short position of Zhengzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everdisplay Optronics and Zhengzhou Coal.

Diversification Opportunities for Everdisplay Optronics and Zhengzhou Coal

0.53

Correlation Coefficient

Everdisplay Optronics  Zhengzhou Coal

Very weak diversification

The 3 months correlation between Everdisplay and Zhengzhou is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Everdisplay Optronics Shanghai and Zhengzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhengzhou Coal Mining and Everdisplay Optronics 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 Everdisplay Optronics Shanghai are associated (or correlated) with Zhengzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhengzhou Coal Mining has no effect on the direction of Everdisplay Optronics i.e., Everdisplay Optronics and Zhengzhou Coal go up and down completely randomly.

Pair Corralation between Everdisplay Optronics and Zhengzhou Coal

Assuming the 90 days trading horizon Everdisplay Optronics Shanghai is expected to under-perform the Zhengzhou Coal. In addition to that, Everdisplay Optronics is 1.11 times more volatile than Zhengzhou Coal Mining. It trades about -0.37 of its total potential returns per unit of risk. Zhengzhou Coal Mining is currently generating about 0.05 per unit of volatility. If you would invest  1,291  in Zhengzhou Coal Mining on October 18, 2024 and sell it today you would earn a total of  18.00  from holding Zhengzhou Coal Mining or generate 1.39% return on investment over 90 days.

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

Everdisplay Optronics Shanghai  vs.  Zhengzhou Coal Mining

Everdisplay Optronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Everdisplay Optronics Shanghai has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Everdisplay Optronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhengzhou Coal Mining

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhengzhou Coal Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhengzhou Coal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Everdisplay Optronics and Zhengzhou Coal

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

The idea behind Everdisplay Optronics Shanghai and Zhengzhou Coal Mining 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.