Correlation Between Drewloong Precision and Zeng Hsing

Can any of the company-specific risk be diversified away by investing in both Drewloong Precision and Zeng Hsing 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 Drewloong Precision and Zeng Hsing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Drewloong Precision and Zeng Hsing Industrial, you can compare the effects of market volatilities on Drewloong Precision and Zeng Hsing 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 Drewloong Precision with a short position of Zeng Hsing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Drewloong Precision and Zeng Hsing.

Diversification Opportunities for Drewloong Precision and Zeng Hsing

0.68

Correlation Coefficient

Drewloong Precision  Zeng Hsing

Poor diversification

The 3 months correlation between Drewloong and Zeng is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Drewloong Precision and Zeng Hsing Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zeng Hsing Industrial and Drewloong Precision 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 Drewloong Precision are associated (or correlated) with Zeng Hsing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zeng Hsing Industrial has no effect on the direction of Drewloong Precision i.e., Drewloong Precision and Zeng Hsing go up and down completely randomly.

Pair Corralation between Drewloong Precision and Zeng Hsing

Assuming the 90 days trading horizon Drewloong Precision is expected to under-perform the Zeng Hsing. But the stock apears to be less risky and, when comparing its historical volatility, Drewloong Precision is 1.68 times less risky than Zeng Hsing. The stock trades about -0.02 of its potential returns per unit of risk. The Zeng Hsing Industrial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,250  in Zeng Hsing Industrial on September 15, 2024 and sell it today you would earn a total of  100.00  from holding Zeng Hsing Industrial or generate 0.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Drewloong Precision  vs.  Zeng Hsing Industrial

Drewloong Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Drewloong Precision 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.

Zeng Hsing Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zeng Hsing Industrial 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 Drewloong Precision and Zeng Hsing

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

The idea behind Drewloong Precision and Zeng Hsing Industrial 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.