Correlation Between ZhongAn Online and DDC Enterprise

Can any of the company-specific risk be diversified away by investing in both ZhongAn Online and DDC Enterprise 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 ZhongAn Online and DDC Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZhongAn Online P and DDC Enterprise Limited, you can compare the effects of market volatilities on ZhongAn Online and DDC Enterprise 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 ZhongAn Online with a short position of DDC Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZhongAn Online and DDC Enterprise.

Diversification Opportunities for ZhongAn Online and DDC Enterprise

0.5

Correlation Coefficient

ZhongAn Online  DDC Enterprise

Very weak diversification

The 3 months correlation between ZhongAn and DDC is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ZhongAn Online P and DDC Enterprise Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DDC Enterprise and ZhongAn Online 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 ZhongAn Online P are associated (or correlated) with DDC Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DDC Enterprise has no effect on the direction of ZhongAn Online i.e., ZhongAn Online and DDC Enterprise go up and down completely randomly.

Pair Corralation between ZhongAn Online and DDC Enterprise

Assuming the 90 days horizon ZhongAn Online P is expected to generate 0.22 times more return on investment than DDC Enterprise. However, ZhongAn Online P is 4.52 times less risky than DDC Enterprise. It trades about -0.05 of its potential returns per unit of risk. DDC Enterprise Limited is currently generating about -0.04 per unit of risk. If you would invest  336.00  in ZhongAn Online P on October 3, 2024 and sell it today you would lose (210.00) from holding ZhongAn Online P or give up 62.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	56.45%
Values	Daily Returns

ZhongAn Online P  vs.  DDC Enterprise Limited

ZhongAn Online P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZhongAn Online P has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DDC Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DDC Enterprise Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ZhongAn Online and DDC Enterprise

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

The idea behind ZhongAn Online P and DDC Enterprise 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..