Correlation Between Wayside Technology and ZTO Express

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

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

Diversification Opportunities for Wayside Technology and ZTO Express

-0.74

Correlation Coefficient

Wayside Technology  ZTO Express

Pay attention - limited upside

The 3 months correlation between Wayside and ZTO is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Wayside Technology Group and ZTO Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTO Express and Wayside Technology 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 Wayside Technology Group 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 Wayside Technology i.e., Wayside Technology and ZTO Express go up and down completely randomly.

Pair Corralation between Wayside Technology and ZTO Express

Assuming the 90 days horizon Wayside Technology Group is expected to generate 1.7 times more return on investment than ZTO Express. However, Wayside Technology is 1.7 times more volatile than ZTO Express. It trades about 0.18 of its potential returns per unit of risk. ZTO Express is currently generating about -0.21 per unit of risk. If you would invest  8,738  in Wayside Technology Group on October 7, 2024 and sell it today you would earn a total of  3,462  from holding Wayside Technology Group or generate 39.62% return on investment over 90 days.

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

Wayside Technology Group  vs.  ZTO Express

Wayside Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

ZTO Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZTO Express has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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 Wayside Technology and ZTO Express

The main advantage of trading using opposite Wayside Technology and ZTO Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wayside Technology 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 Wayside Technology Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.