Correlation Between De Rucci and Zoomlion Heavy

Can any of the company-specific risk be diversified away by investing in both De Rucci and Zoomlion Heavy 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 De Rucci and Zoomlion Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between De Rucci Healthy and Zoomlion Heavy Industry, you can compare the effects of market volatilities on De Rucci and Zoomlion Heavy 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 De Rucci with a short position of Zoomlion Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Rucci and Zoomlion Heavy.

Diversification Opportunities for De Rucci and Zoomlion Heavy

0.66

Correlation Coefficient

De Rucci  Zoomlion Heavy

Poor diversification

The 3 months correlation between 001323 and Zoomlion is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding De Rucci Healthy and Zoomlion Heavy Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoomlion Heavy Industry and De Rucci 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 De Rucci Healthy are associated (or correlated) with Zoomlion Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoomlion Heavy Industry has no effect on the direction of De Rucci i.e., De Rucci and Zoomlion Heavy go up and down completely randomly.

Pair Corralation between De Rucci and Zoomlion Heavy

Assuming the 90 days trading horizon De Rucci Healthy is expected to generate 1.16 times more return on investment than Zoomlion Heavy. However, De Rucci is 1.16 times more volatile than Zoomlion Heavy Industry. It trades about 0.18 of its potential returns per unit of risk. Zoomlion Heavy Industry is currently generating about 0.1 per unit of risk. If you would invest  2,771  in De Rucci Healthy on September 23, 2024 and sell it today you would earn a total of  874.00  from holding De Rucci Healthy or generate 31.54% return on investment over 90 days.

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

De Rucci Healthy  vs.  Zoomlion Heavy Industry

De Rucci Healthy

Risk-Adjusted Performance

13 of 100

Good

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

Zoomlion Heavy Industry

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zoomlion Heavy Industry are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoomlion Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with De Rucci and Zoomlion Heavy

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

The idea behind De Rucci Healthy and Zoomlion Heavy Industry 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.