Correlation Between Hunan Investment and Zhejiang Yongjin

Can any of the company-specific risk be diversified away by investing in both Hunan Investment and Zhejiang Yongjin 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 Hunan Investment and Zhejiang Yongjin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hunan Investment Group and Zhejiang Yongjin Metal, you can compare the effects of market volatilities on Hunan Investment and Zhejiang Yongjin 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 Hunan Investment with a short position of Zhejiang Yongjin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Investment and Zhejiang Yongjin.

Diversification Opportunities for Hunan Investment and Zhejiang Yongjin

0.73

Correlation Coefficient

Hunan Investment  Zhejiang Yongjin

Poor diversification

The 3 months correlation between Hunan and Zhejiang is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Investment Group and Zhejiang Yongjin Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Yongjin Metal and Hunan Investment 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 Hunan Investment Group are associated (or correlated) with Zhejiang Yongjin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Yongjin Metal has no effect on the direction of Hunan Investment i.e., Hunan Investment and Zhejiang Yongjin go up and down completely randomly.

Pair Corralation between Hunan Investment and Zhejiang Yongjin

Assuming the 90 days trading horizon Hunan Investment Group is expected to generate 1.19 times more return on investment than Zhejiang Yongjin. However, Hunan Investment is 1.19 times more volatile than Zhejiang Yongjin Metal. It trades about 0.23 of its potential returns per unit of risk. Zhejiang Yongjin Metal is currently generating about 0.15 per unit of risk. If you would invest  392.00  in Hunan Investment Group on September 17, 2024 and sell it today you would earn a total of  207.00  from holding Hunan Investment Group or generate 52.81% return on investment over 90 days.

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

Hunan Investment Group  vs.  Zhejiang Yongjin Metal

Hunan Investment

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhejiang Yongjin Metal

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Yongjin Metal are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Yongjin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hunan Investment and Zhejiang Yongjin

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

The idea behind Hunan Investment Group and Zhejiang Yongjin Metal 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.