Correlation Between ZEN Graphene and Guangdong Investment

Can any of the company-specific risk be diversified away by investing in both ZEN Graphene and Guangdong Investment 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 ZEN Graphene and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZEN Graphene Solutions and Guangdong Investment Limited, you can compare the effects of market volatilities on ZEN Graphene and Guangdong Investment 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 ZEN Graphene with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZEN Graphene and Guangdong Investment.

Diversification Opportunities for ZEN Graphene and Guangdong Investment

0.45

Correlation Coefficient

ZEN Graphene  Guangdong Investment

Very weak diversification

The 3 months correlation between ZEN and Guangdong is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ZEN Graphene Solutions and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and ZEN Graphene 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 ZEN Graphene Solutions are associated (or correlated) with Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of ZEN Graphene i.e., ZEN Graphene and Guangdong Investment go up and down completely randomly.

Pair Corralation between ZEN Graphene and Guangdong Investment

Given the investment horizon of 90 days ZEN Graphene Solutions is expected to generate 3.2 times more return on investment than Guangdong Investment. However, ZEN Graphene is 3.2 times more volatile than Guangdong Investment Limited. It trades about 0.07 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about -0.01 per unit of risk. If you would invest  97.00  in ZEN Graphene Solutions on December 29, 2024 and sell it today you would earn a total of  16.00  from holding ZEN Graphene Solutions or generate 16.49% return on investment over 90 days.

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

ZEN Graphene Solutions  vs.  Guangdong Investment Limited

ZEN Graphene Solutions

Risk-Adjusted Performance

Modest

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

Guangdong Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Guangdong Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ZEN Graphene and Guangdong Investment

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

The idea behind ZEN Graphene Solutions and Guangdong Investment Limited 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.