Correlation Between Holitech Technology and ZTE Corp

Can any of the company-specific risk be diversified away by investing in both Holitech Technology and ZTE Corp 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 Holitech Technology and ZTE Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Holitech Technology Co and ZTE Corp, you can compare the effects of market volatilities on Holitech Technology and ZTE Corp 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 Holitech Technology with a short position of ZTE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holitech Technology and ZTE Corp.

Diversification Opportunities for Holitech Technology and ZTE Corp

0.63

Correlation Coefficient

Holitech Technology  ZTE Corp

Poor diversification

The 3 months correlation between Holitech and ZTE is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Holitech Technology Co and ZTE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTE Corp and Holitech Technology 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 Holitech Technology Co are associated (or correlated) with ZTE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTE Corp has no effect on the direction of Holitech Technology i.e., Holitech Technology and ZTE Corp go up and down completely randomly.

Pair Corralation between Holitech Technology and ZTE Corp

Assuming the 90 days trading horizon Holitech Technology Co is expected to generate 0.94 times more return on investment than ZTE Corp. However, Holitech Technology Co is 1.07 times less risky than ZTE Corp. It trades about 0.36 of its potential returns per unit of risk. ZTE Corp is currently generating about 0.2 per unit of risk. If you would invest  125.00  in Holitech Technology Co on September 23, 2024 and sell it today you would earn a total of  125.00  from holding Holitech Technology Co or generate 100.0% return on investment over 90 days.

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

Holitech Technology Co  vs.  ZTE Corp

Holitech Technology

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Holitech Technology Co are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Holitech Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

ZTE Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ZTE Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZTE Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holitech Technology and ZTE Corp

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

The idea behind Holitech Technology Co and ZTE 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.