Correlation Between ZongTai Real and X Legend

Can any of the company-specific risk be diversified away by investing in both ZongTai Real and X Legend 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 ZongTai Real and X Legend into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZongTai Real Estate and X Legend Entertainment Co, you can compare the effects of market volatilities on ZongTai Real and X Legend 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 ZongTai Real with a short position of X Legend. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZongTai Real and X Legend.

Diversification Opportunities for ZongTai Real and X Legend

0.18

Correlation Coefficient

ZongTai Real  X Legend

Average diversification

The 3 months correlation between ZongTai and 4994 is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding ZongTai Real Estate and X Legend Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Legend Entertainment and ZongTai Real 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 ZongTai Real Estate are associated (or correlated) with X Legend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Legend Entertainment has no effect on the direction of ZongTai Real i.e., ZongTai Real and X Legend go up and down completely randomly.

Pair Corralation between ZongTai Real and X Legend

Assuming the 90 days trading horizon ZongTai Real Estate is expected to generate 1.13 times more return on investment than X Legend. However, ZongTai Real is 1.13 times more volatile than X Legend Entertainment Co. It trades about -0.01 of its potential returns per unit of risk. X Legend Entertainment Co is currently generating about -0.09 per unit of risk. If you would invest  3,490  in ZongTai Real Estate on September 14, 2024 and sell it today you would lose (65.00) from holding ZongTai Real Estate or give up 1.86% of portfolio value over 90 days.

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

ZongTai Real Estate  vs.  X Legend Entertainment Co

ZongTai Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZongTai Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ZongTai Real is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

X Legend Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X Legend Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with ZongTai Real and X Legend

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

The idea behind ZongTai Real Estate and X Legend Entertainment 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.