Correlation Between Yingde Greatchem and Zhangjiagang Freetrade

Can any of the company-specific risk be diversified away by investing in both Yingde Greatchem and Zhangjiagang Freetrade 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 Yingde Greatchem and Zhangjiagang Freetrade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yingde Greatchem Chemicals and Zhangjiagang Freetrade Science, you can compare the effects of market volatilities on Yingde Greatchem and Zhangjiagang Freetrade 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 Yingde Greatchem with a short position of Zhangjiagang Freetrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yingde Greatchem and Zhangjiagang Freetrade.

Diversification Opportunities for Yingde Greatchem and Zhangjiagang Freetrade

0.88

Correlation Coefficient

Yingde Greatchem  Zhangjiagang Freetrade

Very poor diversification

The 3 months correlation between Yingde and Zhangjiagang is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Yingde Greatchem Chemicals and Zhangjiagang Freetrade Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangjiagang Freetrade and Yingde Greatchem 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 Yingde Greatchem Chemicals are associated (or correlated) with Zhangjiagang Freetrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangjiagang Freetrade has no effect on the direction of Yingde Greatchem i.e., Yingde Greatchem and Zhangjiagang Freetrade go up and down completely randomly.

Pair Corralation between Yingde Greatchem and Zhangjiagang Freetrade

Assuming the 90 days trading horizon Yingde Greatchem Chemicals is expected to under-perform the Zhangjiagang Freetrade. In addition to that, Yingde Greatchem is 1.53 times more volatile than Zhangjiagang Freetrade Science. It trades about -0.02 of its total potential returns per unit of risk. Zhangjiagang Freetrade Science is currently generating about 0.01 per unit of volatility. If you would invest  385.00  in Zhangjiagang Freetrade Science on September 24, 2024 and sell it today you would lose (12.00) from holding Zhangjiagang Freetrade Science or give up 3.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	76.15%
Values	Daily Returns

Yingde Greatchem Chemicals  vs.  Zhangjiagang Freetrade Science

Yingde Greatchem Che

Risk-Adjusted Performance

9 of 100

OK

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

Zhangjiagang Freetrade

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Yingde Greatchem and Zhangjiagang Freetrade

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

The idea behind Yingde Greatchem Chemicals and Zhangjiagang Freetrade Science 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.