Correlation Between Zhongshan Public and Keda Clean

Can any of the company-specific risk be diversified away by investing in both Zhongshan Public and Keda Clean 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 Zhongshan Public and Keda Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhongshan Public Utilities and Keda Clean Energy, you can compare the effects of market volatilities on Zhongshan Public and Keda Clean 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 Zhongshan Public with a short position of Keda Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongshan Public and Keda Clean.

Diversification Opportunities for Zhongshan Public and Keda Clean

0.93

Correlation Coefficient

Zhongshan Public  Keda Clean

Almost no diversification

The 3 months correlation between Zhongshan and Keda is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Public Utilities and Keda Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keda Clean Energy and Zhongshan Public 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 Zhongshan Public Utilities are associated (or correlated) with Keda Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keda Clean Energy has no effect on the direction of Zhongshan Public i.e., Zhongshan Public and Keda Clean go up and down completely randomly.

Pair Corralation between Zhongshan Public and Keda Clean

Assuming the 90 days trading horizon Zhongshan Public Utilities is expected to generate 0.94 times more return on investment than Keda Clean. However, Zhongshan Public Utilities is 1.06 times less risky than Keda Clean. It trades about 0.17 of its potential returns per unit of risk. Keda Clean Energy is currently generating about 0.11 per unit of risk. If you would invest  720.00  in Zhongshan Public Utilities on September 12, 2024 and sell it today you would earn a total of  204.00  from holding Zhongshan Public Utilities or generate 28.33% return on investment over 90 days.

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

Zhongshan Public Utilities  vs.  Keda Clean Energy

Zhongshan Public Uti

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Public Utilities are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Public sustained solid returns over the last few months and may actually be approaching a breakup point.

Keda Clean Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keda Clean Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Keda Clean sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhongshan Public and Keda Clean

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

The idea behind Zhongshan Public Utilities and Keda Clean Energy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.