Correlation Between BII Railway and Zhongsheng Group

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

By analyzing existing cross correlation between BII Railway Transportation and Zhongsheng Group Holdings, you can compare the effects of market volatilities on BII Railway and Zhongsheng Group 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 BII Railway with a short position of Zhongsheng Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of BII Railway and Zhongsheng Group.

Diversification Opportunities for BII Railway and Zhongsheng Group

-0.25

Correlation Coefficient

BII Railway  Zhongsheng Group

Very good diversification

The 3 months correlation between BII and Zhongsheng is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and Zhongsheng Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongsheng Group Holdings and BII 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 BII Railway Transportation are associated (or correlated) with Zhongsheng Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongsheng Group Holdings has no effect on the direction of BII Railway i.e., BII Railway and Zhongsheng Group go up and down completely randomly.

Pair Corralation between BII Railway and Zhongsheng Group

Assuming the 90 days horizon BII Railway is expected to generate 4.31 times less return on investment than Zhongsheng Group. But when comparing it to its historical volatility, BII Railway Transportation is 1.75 times less risky than Zhongsheng Group. It trades about 0.01 of its potential returns per unit of risk. Zhongsheng Group Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  152.00  in Zhongsheng Group Holdings on October 4, 2024 and sell it today you would earn a total of  21.00  from holding Zhongsheng Group Holdings or generate 13.82% return on investment over 90 days.

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

BII Railway Transportation  vs.  Zhongsheng Group Holdings

BII Railway Transpor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BII Railway Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Zhongsheng Group Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongsheng Group Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zhongsheng Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BII Railway and Zhongsheng Group

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

The idea behind BII Railway Transportation and Zhongsheng Group Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.