Correlation Between Zhengzhou Coal and Casio Computer

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

By analyzing existing cross correlation between Zhengzhou Coal Mining and Casio Computer CoLtd, you can compare the effects of market volatilities on Zhengzhou Coal and Casio Computer 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 Zhengzhou Coal with a short position of Casio Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhengzhou Coal and Casio Computer.

Diversification Opportunities for Zhengzhou Coal and Casio Computer

0.44

Correlation Coefficient

Zhengzhou Coal  Casio Computer

Very weak diversification

The 3 months correlation between Zhengzhou and Casio is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Zhengzhou Coal Mining and Casio Computer CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casio Computer CoLtd and Zhengzhou Coal 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 Zhengzhou Coal Mining are associated (or correlated) with Casio Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casio Computer CoLtd has no effect on the direction of Zhengzhou Coal i.e., Zhengzhou Coal and Casio Computer go up and down completely randomly.

Pair Corralation between Zhengzhou Coal and Casio Computer

Assuming the 90 days horizon Zhengzhou Coal is expected to generate 4.2 times less return on investment than Casio Computer. But when comparing it to its historical volatility, Zhengzhou Coal Mining is 1.15 times less risky than Casio Computer. It trades about 0.05 of its potential returns per unit of risk. Casio Computer CoLtd is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  675.00  in Casio Computer CoLtd on October 25, 2024 and sell it today you would earn a total of  109.00  from holding Casio Computer CoLtd or generate 16.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Zhengzhou Coal Mining  vs.  Casio Computer CoLtd

Zhengzhou Coal Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhengzhou Coal Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Zhengzhou Coal is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Casio Computer CoLtd

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Zhengzhou Coal and Casio Computer

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

The idea behind Zhengzhou Coal Mining and Casio Computer CoLtd 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.