Correlation Between Zhongshan Public and Keeson Technology

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

Diversification Opportunities for Zhongshan Public and Keeson Technology

0.75

Correlation Coefficient

Zhongshan Public  Keeson Technology

Poor diversification

The 3 months correlation between Zhongshan and Keeson is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Public Utilities and Keeson Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keeson Technology Corp 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 Keeson Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keeson Technology Corp has no effect on the direction of Zhongshan Public i.e., Zhongshan Public and Keeson Technology go up and down completely randomly.

Pair Corralation between Zhongshan Public and Keeson Technology

Assuming the 90 days trading horizon Zhongshan Public is expected to generate 5.87 times less return on investment than Keeson Technology. But when comparing it to its historical volatility, Zhongshan Public Utilities is 1.43 times less risky than Keeson Technology. It trades about 0.03 of its potential returns per unit of risk. Keeson Technology Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  994.00  in Keeson Technology Corp on September 28, 2024 and sell it today you would earn a total of  240.00  from holding Keeson Technology Corp or generate 24.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Zhongshan Public Utilities  vs.  Keeson Technology Corp

Zhongshan Public Uti

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Public Utilities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhongshan Public is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Keeson Technology Corp

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Zhongshan Public and Keeson Technology

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

The idea behind Zhongshan Public Utilities and Keeson Technology Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.