Correlation Between Liaoning Chengda and A Zenith

Can any of the company-specific risk be diversified away by investing in both Liaoning Chengda and A Zenith 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 Liaoning Chengda and A Zenith into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Liaoning Chengda Biotechnology and A Zenith Home Furnishings, you can compare the effects of market volatilities on Liaoning Chengda and A Zenith 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 Liaoning Chengda with a short position of A Zenith. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liaoning Chengda and A Zenith.

Diversification Opportunities for Liaoning Chengda and A Zenith

0.3

Correlation Coefficient

Liaoning Chengda  A Zenith

Weak diversification

The 3 months correlation between Liaoning and 603389 is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Liaoning Chengda Biotechnology and A Zenith Home Furnishings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A Zenith Home and Liaoning Chengda 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 Liaoning Chengda Biotechnology are associated (or correlated) with A Zenith. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A Zenith Home has no effect on the direction of Liaoning Chengda i.e., Liaoning Chengda and A Zenith go up and down completely randomly.

Pair Corralation between Liaoning Chengda and A Zenith

Assuming the 90 days trading horizon Liaoning Chengda Biotechnology is expected to under-perform the A Zenith. But the stock apears to be less risky and, when comparing its historical volatility, Liaoning Chengda Biotechnology is 6.72 times less risky than A Zenith. The stock trades about -0.23 of its potential returns per unit of risk. The A Zenith Home Furnishings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  659.00  in A Zenith Home Furnishings on October 1, 2024 and sell it today you would earn a total of  7.00  from holding A Zenith Home Furnishings or generate 1.06% return on investment over 90 days.

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

Liaoning Chengda Biotechnology  vs.  A Zenith Home Furnishings

Liaoning Chengda Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liaoning Chengda Biotechnology 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

A Zenith Home

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Liaoning Chengda and A Zenith

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

The idea behind Liaoning Chengda Biotechnology and A Zenith Home Furnishings 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.