Correlation Between Dairy Farm and ZTO Express

Can any of the company-specific risk be diversified away by investing in both Dairy Farm and ZTO Express 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 Dairy Farm and ZTO Express into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dairy Farm International and ZTO Express, you can compare the effects of market volatilities on Dairy Farm and ZTO Express 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 Dairy Farm with a short position of ZTO Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and ZTO Express.

Diversification Opportunities for Dairy Farm and ZTO Express

0.04

Correlation Coefficient

Dairy Farm  ZTO Express

Significant diversification

The 3 months correlation between Dairy and ZTO is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and ZTO Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTO Express and Dairy Farm 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 Dairy Farm International are associated (or correlated) with ZTO Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTO Express has no effect on the direction of Dairy Farm i.e., Dairy Farm and ZTO Express go up and down completely randomly.

Pair Corralation between Dairy Farm and ZTO Express

Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the ZTO Express. In addition to that, Dairy Farm is 1.21 times more volatile than ZTO Express. It trades about -0.05 of its total potential returns per unit of risk. ZTO Express is currently generating about 0.01 per unit of volatility. If you would invest  1,880  in ZTO Express on December 19, 2024 and sell it today you would lose (10.00) from holding ZTO Express or give up 0.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Dairy Farm International  vs.  ZTO Express

Dairy Farm International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dairy Farm International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ZTO Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZTO Express has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ZTO Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dairy Farm and ZTO Express

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

The idea behind Dairy Farm International and ZTO Express 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.