Correlation Between Zhejiang Kingland and Aurora Optoelectronics

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

By analyzing existing cross correlation between Zhejiang Kingland Pipeline and Aurora Optoelectronics Co, you can compare the effects of market volatilities on Zhejiang Kingland and Aurora Optoelectronics 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 Kingland with a short position of Aurora Optoelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Kingland and Aurora Optoelectronics.

Diversification Opportunities for Zhejiang Kingland and Aurora Optoelectronics

0.4

Correlation Coefficient

Zhejiang Kingland  Aurora Optoelectronics

Very weak diversification

The 3 months correlation between Zhejiang and Aurora is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Kingland Pipeline and Aurora Optoelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Optoelectronics and Zhejiang Kingland 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 Kingland Pipeline are associated (or correlated) with Aurora Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Optoelectronics has no effect on the direction of Zhejiang Kingland i.e., Zhejiang Kingland and Aurora Optoelectronics go up and down completely randomly.

Pair Corralation between Zhejiang Kingland and Aurora Optoelectronics

Assuming the 90 days trading horizon Zhejiang Kingland Pipeline is expected to under-perform the Aurora Optoelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Zhejiang Kingland Pipeline is 3.09 times less risky than Aurora Optoelectronics. The stock trades about -0.15 of its potential returns per unit of risk. The Aurora Optoelectronics Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  253.00  in Aurora Optoelectronics Co on September 29, 2024 and sell it today you would lose (1.00) from holding Aurora Optoelectronics Co or give up 0.4% of portfolio value over 90 days.

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

Zhejiang Kingland Pipeline  vs.  Aurora Optoelectronics Co

Zhejiang Kingland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Kingland Pipeline has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhejiang Kingland is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aurora Optoelectronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Optoelectronics Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aurora Optoelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Kingland and Aurora Optoelectronics

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

The idea behind Zhejiang Kingland Pipeline and Aurora Optoelectronics Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.