Correlation Between ZTO Express and Freightos Limited

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

By analyzing existing cross correlation between ZTO Express and Freightos Limited Ordinary, you can compare the effects of market volatilities on ZTO Express and Freightos Limited 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 Freightos Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZTO Express and Freightos Limited.

Diversification Opportunities for ZTO Express and Freightos Limited

-0.69

Correlation Coefficient

ZTO Express  Freightos Limited

Excellent diversification

The 3 months correlation between ZTO and Freightos is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding ZTO Express and Freightos Limited Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freightos Limited 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 Freightos Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freightos Limited has no effect on the direction of ZTO Express i.e., ZTO Express and Freightos Limited go up and down completely randomly.

Pair Corralation between ZTO Express and Freightos Limited

Considering the 90-day investment horizon ZTO Express is expected to under-perform the Freightos Limited. But the stock apears to be less risky and, when comparing its historical volatility, ZTO Express is 3.08 times less risky than Freightos Limited. The stock trades about -0.08 of its potential returns per unit of risk. The Freightos Limited Ordinary is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  157.00  in Freightos Limited Ordinary on September 3, 2024 and sell it today you would earn a total of  50.00  from holding Freightos Limited Ordinary or generate 31.85% return on investment over 90 days.

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

ZTO Express  vs.  Freightos Limited Ordinary

ZTO Express

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Freightos Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freightos Limited Ordinary are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Freightos Limited displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZTO Express and Freightos Limited

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

The idea behind ZTO Express and Freightos Limited Ordinary 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.