Correlation Between CHEMICAL INDUSTRIES and ZTO EXPRESS

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

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

Diversification Opportunities for CHEMICAL INDUSTRIES and ZTO EXPRESS

0.0

Correlation Coefficient

CHEMICAL INDUSTRIES  ZTO EXPRESS

Pay attention - limited upside

The 3 months correlation between CHEMICAL and ZTO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CHEMICAL INDUSTRIES and ZTO EXPRESS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTO EXPRESS and CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES 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 CHEMICAL INDUSTRIES i.e., CHEMICAL INDUSTRIES and ZTO EXPRESS go up and down completely randomly.

Pair Corralation between CHEMICAL INDUSTRIES and ZTO EXPRESS

Assuming the 90 days trading horizon CHEMICAL INDUSTRIES is expected to generate 0.09 times more return on investment than ZTO EXPRESS. However, CHEMICAL INDUSTRIES is 11.11 times less risky than ZTO EXPRESS. It trades about 0.06 of its potential returns per unit of risk. ZTO EXPRESS is currently generating about -0.01 per unit of risk. If you would invest  40.00  in CHEMICAL INDUSTRIES on October 10, 2024 and sell it today you would earn a total of  3.00  from holding CHEMICAL INDUSTRIES or generate 7.5% return on investment over 90 days.

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

CHEMICAL INDUSTRIES  vs.  ZTO EXPRESS

CHEMICAL INDUSTRIES

Risk-Adjusted Performance

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Very Weak

Over the last 90 days CHEMICAL INDUSTRIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, CHEMICAL INDUSTRIES is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ZTO EXPRESS

Risk-Adjusted Performance

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Very Weak

Over the last 90 days ZTO EXPRESS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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 CHEMICAL INDUSTRIES and ZTO EXPRESS

The main advantage of trading using opposite CHEMICAL INDUSTRIES and ZTO EXPRESS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHEMICAL INDUSTRIES 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's long position.

The idea behind CHEMICAL INDUSTRIES 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.