Correlation Between Shanghai Lingyun and Zhejiang Qianjiang

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

By analyzing existing cross correlation between Shanghai Lingyun Industries and Zhejiang Qianjiang Motorcycle, you can compare the effects of market volatilities on Shanghai Lingyun and Zhejiang Qianjiang 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 Shanghai Lingyun with a short position of Zhejiang Qianjiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Lingyun and Zhejiang Qianjiang.

Diversification Opportunities for Shanghai Lingyun and Zhejiang Qianjiang

-0.53

Correlation Coefficient

Shanghai Lingyun  Zhejiang Qianjiang

Excellent diversification

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

Pair Corralation between Shanghai Lingyun and Zhejiang Qianjiang

Assuming the 90 days trading horizon Shanghai Lingyun Industries is expected to under-perform the Zhejiang Qianjiang. In addition to that, Shanghai Lingyun is 1.25 times more volatile than Zhejiang Qianjiang Motorcycle. It trades about -0.16 of its total potential returns per unit of risk. Zhejiang Qianjiang Motorcycle is currently generating about 0.07 per unit of volatility. If you would invest  1,681  in Zhejiang Qianjiang Motorcycle on December 4, 2024 and sell it today you would earn a total of  138.00  from holding Zhejiang Qianjiang Motorcycle or generate 8.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Shanghai Lingyun Industries  vs.  Zhejiang Qianjiang Motorcycle

Shanghai Lingyun Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Lingyun Industries 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.

Zhejiang Qianjiang

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Qianjiang Motorcycle are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Qianjiang may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shanghai Lingyun and Zhejiang Qianjiang

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

The idea behind Shanghai Lingyun Industries and Zhejiang Qianjiang Motorcycle 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.