Correlation Between ZhongAn Online and Stagwell

Can any of the company-specific risk be diversified away by investing in both ZhongAn Online and Stagwell 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 Stagwell 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 Stagwell, you can compare the effects of market volatilities on ZhongAn Online and Stagwell 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 Stagwell. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZhongAn Online and Stagwell.

Diversification Opportunities for ZhongAn Online and Stagwell

0.28

Correlation Coefficient

ZhongAn Online  Stagwell

Modest diversification

The 3 months correlation between ZhongAn and Stagwell is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ZhongAn Online P and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell 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 Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of ZhongAn Online i.e., ZhongAn Online and Stagwell go up and down completely randomly.

Pair Corralation between ZhongAn Online and Stagwell

Assuming the 90 days horizon ZhongAn Online P is expected to under-perform the Stagwell. But the pink sheet apears to be less risky and, when comparing its historical volatility, ZhongAn Online P is 1.11 times less risky than Stagwell. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Stagwell is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  691.00  in Stagwell on October 11, 2024 and sell it today you would lose (70.00) from holding Stagwell or give up 10.13% of portfolio value over 90 days.

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

ZhongAn Online P  vs.  Stagwell

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.

Stagwell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with ZhongAn Online and Stagwell

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

The idea behind ZhongAn Online P and Stagwell 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.