Correlation Between International Business and ZhongAn Online

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

By analyzing existing cross correlation between International Business Machines and ZhongAn Online P, you can compare the effects of market volatilities on International Business and ZhongAn Online 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 International Business with a short position of ZhongAn Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and ZhongAn Online.

Diversification Opportunities for International Business and ZhongAn Online

-0.27

Correlation Coefficient

International Business  ZhongAn Online

Very good diversification

The 3 months correlation between International and ZhongAn is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and ZhongAn Online P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZhongAn Online P and International Business 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 International Business Machines are associated (or correlated) with ZhongAn Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZhongAn Online P has no effect on the direction of International Business i.e., International Business and ZhongAn Online go up and down completely randomly.

Pair Corralation between International Business and ZhongAn Online

Considering the 90-day investment horizon International Business Machines is expected to generate 0.36 times more return on investment than ZhongAn Online. However, International Business Machines is 2.8 times less risky than ZhongAn Online. It trades about 0.1 of its potential returns per unit of risk. ZhongAn Online P is currently generating about -0.03 per unit of risk. If you would invest  12,440  in International Business Machines on October 21, 2024 and sell it today you would earn a total of  10,039  from holding International Business Machines or generate 80.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

International Business Machine  vs.  ZhongAn Online P

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

ZhongAn Online P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZhongAn Online P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Pair Trading with International Business and ZhongAn Online

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

The idea behind International Business Machines and ZhongAn Online P 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.