Correlation Between Hongli Group and ZK International

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

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

Diversification Opportunities for Hongli Group and ZK International

0.59

Correlation Coefficient

Hongli Group  ZK International

Very weak diversification

The 3 months correlation between Hongli and ZKIN is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hongli Group Ordinary and ZK International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZK International and Hongli Group 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 Hongli Group Ordinary are associated (or correlated) with ZK International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZK International has no effect on the direction of Hongli Group i.e., Hongli Group and ZK International go up and down completely randomly.

Pair Corralation between Hongli Group and ZK International

Considering the 90-day investment horizon Hongli Group Ordinary is expected to under-perform the ZK International. But the stock apears to be less risky and, when comparing its historical volatility, Hongli Group Ordinary is 1.99 times less risky than ZK International. The stock trades about -0.14 of its potential returns per unit of risk. The ZK International Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  69.00  in ZK International Group on October 10, 2024 and sell it today you would lose (3.00) from holding ZK International Group or give up 4.35% of portfolio value over 90 days.

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

Hongli Group Ordinary  vs.  ZK International Group

Hongli Group Ordinary

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hongli Group Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Hongli Group is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

ZK International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ZK International Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, ZK International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hongli Group and ZK International

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

The idea behind Hongli Group Ordinary and ZK International Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.