Correlation Between Zhengzhou Coal and Ecotel Communication

Can any of the company-specific risk be diversified away by investing in both Zhengzhou Coal and Ecotel Communication 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 Ecotel Communication 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 ecotel communication ag, you can compare the effects of market volatilities on Zhengzhou Coal and Ecotel Communication 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 Ecotel Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhengzhou Coal and Ecotel Communication.

Diversification Opportunities for Zhengzhou Coal and Ecotel Communication

0.47

Correlation Coefficient

Zhengzhou Coal  Ecotel Communication

Very weak diversification

The 3 months correlation between Zhengzhou and Ecotel is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Zhengzhou Coal Mining and ecotel communication ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ecotel communication 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 Ecotel Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ecotel communication has no effect on the direction of Zhengzhou Coal i.e., Zhengzhou Coal and Ecotel Communication go up and down completely randomly.

Pair Corralation between Zhengzhou Coal and Ecotel Communication

Assuming the 90 days horizon Zhengzhou Coal Mining is expected to generate 1.12 times more return on investment than Ecotel Communication. However, Zhengzhou Coal is 1.12 times more volatile than ecotel communication ag. It trades about 0.05 of its potential returns per unit of risk. ecotel communication ag is currently generating about -0.02 per unit of risk. If you would invest  122.00  in Zhengzhou Coal Mining on October 25, 2024 and sell it today you would earn a total of  4.00  from holding Zhengzhou Coal Mining or generate 3.28% 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.  ecotel communication ag

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.

ecotel communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ecotel communication ag has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Ecotel Communication is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zhengzhou Coal and Ecotel Communication

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

The idea behind Zhengzhou Coal Mining and ecotel communication ag 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.