Correlation Between Eagle Cold and ZongTai Real

Can any of the company-specific risk be diversified away by investing in both Eagle Cold and ZongTai Real 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 Eagle Cold and ZongTai Real into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eagle Cold Storage and ZongTai Real Estate, you can compare the effects of market volatilities on Eagle Cold and ZongTai Real 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 Eagle Cold with a short position of ZongTai Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Cold and ZongTai Real.

Diversification Opportunities for Eagle Cold and ZongTai Real

-0.6

Correlation Coefficient

Eagle Cold  ZongTai Real

Excellent diversification

The 3 months correlation between Eagle and ZongTai is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Cold Storage and ZongTai Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZongTai Real Estate and Eagle Cold 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 Eagle Cold Storage are associated (or correlated) with ZongTai Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZongTai Real Estate has no effect on the direction of Eagle Cold i.e., Eagle Cold and ZongTai Real go up and down completely randomly.

Pair Corralation between Eagle Cold and ZongTai Real

Assuming the 90 days trading horizon Eagle Cold is expected to generate 1.67 times less return on investment than ZongTai Real. But when comparing it to its historical volatility, Eagle Cold Storage is 2.43 times less risky than ZongTai Real. It trades about 0.08 of its potential returns per unit of risk. ZongTai Real Estate is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,884  in ZongTai Real Estate on October 4, 2024 and sell it today you would earn a total of  1,441  from holding ZongTai Real Estate or generate 76.49% return on investment over 90 days.

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

Eagle Cold Storage  vs.  ZongTai Real Estate

Eagle Cold Storage

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Cold Storage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Eagle Cold is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ZongTai Real Estate

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZongTai Real Estate are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ZongTai Real is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Eagle Cold and ZongTai Real

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

The idea behind Eagle Cold Storage and ZongTai Real Estate 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.