Correlation Between Zhong Yang and Netcapital

Can any of the company-specific risk be diversified away by investing in both Zhong Yang and Netcapital 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 Netcapital 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 Netcapital, you can compare the effects of market volatilities on Zhong Yang and Netcapital 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 Netcapital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhong Yang and Netcapital.

Diversification Opportunities for Zhong Yang and Netcapital

-0.14

Correlation Coefficient

Zhong Yang  Netcapital

Good diversification

The 3 months correlation between Zhong and Netcapital is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Zhong Yang Financial and Netcapital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcapital 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 Netcapital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcapital has no effect on the direction of Zhong Yang i.e., Zhong Yang and Netcapital go up and down completely randomly.

Pair Corralation between Zhong Yang and Netcapital

Considering the 90-day investment horizon Zhong Yang Financial is expected to under-perform the Netcapital. But the stock apears to be less risky and, when comparing its historical volatility, Zhong Yang Financial is 1.73 times less risky than Netcapital. The stock trades about -0.1 of its potential returns per unit of risk. The Netcapital is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  191.00  in Netcapital on November 29, 2024 and sell it today you would earn a total of  24.00  from holding Netcapital or generate 12.57% return on investment over 90 days.

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

Zhong Yang Financial  vs.  Netcapital

Zhong Yang Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zhong Yang Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Netcapital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Netcapital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Netcapital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhong Yang and Netcapital

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

The idea behind Zhong Yang Financial and Netcapital 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.