Correlation Between Loews Corp and ZhongAn Online

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

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

Diversification Opportunities for Loews Corp and ZhongAn Online

-0.39

Correlation Coefficient

Loews Corp  ZhongAn Online

Very good diversification

The 3 months correlation between Loews and ZhongAn is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Loews Corp 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 Loews Corp 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 Loews Corp 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 Loews Corp i.e., Loews Corp and ZhongAn Online go up and down completely randomly.

Pair Corralation between Loews Corp and ZhongAn Online

Assuming the 90 days horizon Loews Corp is expected to generate 0.3 times more return on investment than ZhongAn Online. However, Loews Corp is 3.28 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 -0.02 per unit of risk. If you would invest  5,470  in Loews Corp on September 30, 2024 and sell it today you would earn a total of  2,680  from holding Loews Corp or generate 48.99% return on investment over 90 days.

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

Loews Corp  vs.  ZhongAn Online P

Loews Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Loews Corp reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest fragile 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.

Pair Trading with Loews Corp and ZhongAn Online

The main advantage of trading using opposite Loews Corp and ZhongAn Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loews Corp 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 Loews Corp 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.