Correlation Between Bohai Leasing and Zhongtong Guomai

Can any of the company-specific risk be diversified away by investing in both Bohai Leasing and Zhongtong Guomai 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 Bohai Leasing and Zhongtong Guomai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bohai Leasing Co and Zhongtong Guomai Communication, you can compare the effects of market volatilities on Bohai Leasing and Zhongtong Guomai 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 Bohai Leasing with a short position of Zhongtong Guomai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bohai Leasing and Zhongtong Guomai.

Diversification Opportunities for Bohai Leasing and Zhongtong Guomai

0.9

Correlation Coefficient

Bohai Leasing  Zhongtong Guomai

Almost no diversification

The 3 months correlation between Bohai and Zhongtong is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bohai Leasing Co and Zhongtong Guomai Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongtong Guomai Com and Bohai Leasing 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 Bohai Leasing Co are associated (or correlated) with Zhongtong Guomai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongtong Guomai Com has no effect on the direction of Bohai Leasing i.e., Bohai Leasing and Zhongtong Guomai go up and down completely randomly.

Pair Corralation between Bohai Leasing and Zhongtong Guomai

Assuming the 90 days trading horizon Bohai Leasing Co is expected to generate 0.74 times more return on investment than Zhongtong Guomai. However, Bohai Leasing Co is 1.35 times less risky than Zhongtong Guomai. It trades about 0.06 of its potential returns per unit of risk. Zhongtong Guomai Communication is currently generating about 0.0 per unit of risk. If you would invest  227.00  in Bohai Leasing Co on September 28, 2024 and sell it today you would earn a total of  166.00  from holding Bohai Leasing Co or generate 73.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.79%
Values	Daily Returns

Bohai Leasing Co  vs.  Zhongtong Guomai Communication

Bohai Leasing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bohai Leasing Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bohai Leasing sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhongtong Guomai Com

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongtong Guomai Communication are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongtong Guomai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bohai Leasing and Zhongtong Guomai

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

The idea behind Bohai Leasing Co and Zhongtong Guomai Communication 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 Anywhere module to track or share privately all of your investments from the convenience of any device.