Correlation Between ZTO Express and Air T

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

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

Diversification Opportunities for ZTO Express and Air T

0.63

Correlation Coefficient

ZTO Express  Air T

Poor diversification

The 3 months correlation between ZTO and Air is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ZTO Express and Air T Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air T Inc and ZTO Express 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 ZTO Express are associated (or correlated) with Air T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air T Inc has no effect on the direction of ZTO Express i.e., ZTO Express and Air T go up and down completely randomly.

Pair Corralation between ZTO Express and Air T

Considering the 90-day investment horizon ZTO Express is expected to generate 1.97 times less return on investment than Air T. In addition to that, ZTO Express is 2.83 times more volatile than Air T Inc. It trades about 0.01 of its total potential returns per unit of risk. Air T Inc is currently generating about 0.06 per unit of volatility. If you would invest  1,655  in Air T Inc on December 26, 2024 and sell it today you would earn a total of  45.00  from holding Air T Inc or generate 2.72% return on investment over 90 days.

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

ZTO Express  vs.  Air T Inc

ZTO Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZTO Express has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ZTO Express is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Air T Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air T Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Air T is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ZTO Express and Air T

The main advantage of trading using opposite ZTO Express and Air T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZTO Express position performs unexpectedly, Air T 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 Air T will offset losses from the drop in Air T's long position.

The idea behind ZTO Express and Air T Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.