Correlation Between Zeon and China Communications

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

By analyzing existing cross correlation between Zeon Corporation and China Communications Services, you can compare the effects of market volatilities on Zeon and China Communications 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 Zeon with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zeon and China Communications.

Diversification Opportunities for Zeon and China Communications

0.11

Correlation Coefficient

Zeon  China Communications

Average diversification

The 3 months correlation between Zeon and China is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Zeon Corp. and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and Zeon 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 Zeon Corporation are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Zeon i.e., Zeon and China Communications go up and down completely randomly.

Pair Corralation between Zeon and China Communications

Assuming the 90 days horizon Zeon is expected to generate 17.73 times less return on investment than China Communications. But when comparing it to its historical volatility, Zeon Corporation is 2.75 times less risky than China Communications. It trades about 0.01 of its potential returns per unit of risk. China Communications Services is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9.40  in China Communications Services on October 11, 2024 and sell it today you would earn a total of  42.60  from holding China Communications Services or generate 453.19% return on investment over 90 days.

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

Zeon Corp.  vs.  China Communications Services

Zeon

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zeon Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zeon may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Communications Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Communications is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zeon and China Communications

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

The idea behind Zeon Corporation and China Communications Services 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.