Correlation Between Zhong Yang and Mercurity Fintech

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

By analyzing existing cross correlation between Zhong Yang Financial and Mercurity Fintech Holding, you can compare the effects of market volatilities on Zhong Yang and Mercurity Fintech 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 Zhong Yang with a short position of Mercurity Fintech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhong Yang and Mercurity Fintech.

Diversification Opportunities for Zhong Yang and Mercurity Fintech

0.62

Correlation Coefficient

Zhong Yang  Mercurity Fintech

Poor diversification

The 3 months correlation between Zhong and Mercurity is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Zhong Yang Financial and Mercurity Fintech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercurity Fintech Holding and Zhong Yang 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 Zhong Yang Financial are associated (or correlated) with Mercurity Fintech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercurity Fintech Holding has no effect on the direction of Zhong Yang i.e., Zhong Yang and Mercurity Fintech go up and down completely randomly.

Pair Corralation between Zhong Yang and Mercurity Fintech

Considering the 90-day investment horizon Zhong Yang Financial is expected to generate 0.46 times more return on investment than Mercurity Fintech. However, Zhong Yang Financial is 2.18 times less risky than Mercurity Fintech. It trades about 0.03 of its potential returns per unit of risk. Mercurity Fintech Holding is currently generating about 0.01 per unit of risk. If you would invest  128.00  in Zhong Yang Financial on December 19, 2024 and sell it today you would earn a total of  4.00  from holding Zhong Yang Financial or generate 3.13% return on investment over 90 days.

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

Zhong Yang Financial  vs.  Mercurity Fintech Holding

Zhong Yang Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhong Yang Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Zhong Yang is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Mercurity Fintech Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mercurity Fintech Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Mercurity Fintech is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Zhong Yang and Mercurity Fintech

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

The idea behind Zhong Yang Financial and Mercurity Fintech Holding 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.