Correlation Between ZTE Corp and Guangdong Electric
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By analyzing existing cross correlation between ZTE Corp and Guangdong Electric Power, you can compare the effects of market volatilities on ZTE Corp and Guangdong Electric 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 ZTE Corp with a short position of Guangdong Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZTE Corp and Guangdong Electric.
Diversification Opportunities for ZTE Corp and Guangdong Electric
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ZTE and Guangdong is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ZTE Corp and Guangdong Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Electric Power and ZTE Corp 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 ZTE Corp are associated (or correlated) with Guangdong Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Electric Power has no effect on the direction of ZTE Corp i.e., ZTE Corp and Guangdong Electric go up and down completely randomly.
Pair Corralation between ZTE Corp and Guangdong Electric
Assuming the 90 days trading horizon ZTE Corp is expected to generate 3.32 times more return on investment than Guangdong Electric. However, ZTE Corp is 3.32 times more volatile than Guangdong Electric Power. It trades about 0.2 of its potential returns per unit of risk. Guangdong Electric Power is currently generating about 0.1 per unit of risk. If you would invest 2,490 in ZTE Corp on September 23, 2024 and sell it today you would earn a total of 1,248 from holding ZTE Corp or generate 50.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
ZTE Corp vs. Guangdong Electric Power
Performance |
Timeline |
ZTE Corp |
Guangdong Electric Power |
ZTE Corp and Guangdong Electric Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ZTE Corp and Guangdong Electric
The main advantage of trading using opposite ZTE Corp and Guangdong Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZTE Corp position performs unexpectedly, Guangdong Electric 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 Electric will offset losses from the drop in Guangdong Electric's long position.ZTE Corp vs. Industrial and Commercial | ZTE Corp vs. Agricultural Bank of | ZTE Corp vs. China Construction Bank | ZTE Corp vs. Bank of China |
Guangdong Electric vs. Industrial and Commercial | Guangdong Electric vs. Agricultural Bank of | Guangdong Electric vs. China Construction Bank | Guangdong Electric vs. Bank of China |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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