Correlation Between Zhejiang Qianjiang and Railway Signal

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

By analyzing existing cross correlation between Zhejiang Qianjiang Motorcycle and Railway Signal Communication, you can compare the effects of market volatilities on Zhejiang Qianjiang and Railway Signal 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 Zhejiang Qianjiang with a short position of Railway Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Qianjiang and Railway Signal.

Diversification Opportunities for Zhejiang Qianjiang and Railway Signal

0.55

Correlation Coefficient

Zhejiang Qianjiang  Railway Signal

Very weak diversification

The 3 months correlation between Zhejiang and Railway is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Qianjiang Motorcycle and Railway Signal Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Railway Signal Commu and Zhejiang Qianjiang 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 Zhejiang Qianjiang Motorcycle are associated (or correlated) with Railway Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Railway Signal Commu has no effect on the direction of Zhejiang Qianjiang i.e., Zhejiang Qianjiang and Railway Signal go up and down completely randomly.

Pair Corralation between Zhejiang Qianjiang and Railway Signal

Assuming the 90 days trading horizon Zhejiang Qianjiang Motorcycle is expected to under-perform the Railway Signal. In addition to that, Zhejiang Qianjiang is 1.29 times more volatile than Railway Signal Communication. It trades about -0.01 of its total potential returns per unit of risk. Railway Signal Communication is currently generating about 0.04 per unit of volatility. If you would invest  473.00  in Railway Signal Communication on September 27, 2024 and sell it today you would earn a total of  147.00  from holding Railway Signal Communication or generate 31.08% return on investment over 90 days.

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

Zhejiang Qianjiang Motorcycle  vs.  Railway Signal Communication

Zhejiang Qianjiang

Risk-Adjusted Performance

2 of 100

Weak

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

Railway Signal Commu

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Railway Signal Communication are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Railway Signal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Qianjiang and Railway Signal

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

The idea behind Zhejiang Qianjiang Motorcycle and Railway Signal 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.