Correlation Between Chinese Universe and Zhejiang Daily

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

By analyzing existing cross correlation between Chinese Universe Publishing and Zhejiang Daily Media, you can compare the effects of market volatilities on Chinese Universe and Zhejiang Daily 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 Chinese Universe with a short position of Zhejiang Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinese Universe and Zhejiang Daily.

Diversification Opportunities for Chinese Universe and Zhejiang Daily

-0.22

Correlation Coefficient

Chinese Universe  Zhejiang Daily

Very good diversification

The 3 months correlation between Chinese and Zhejiang is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Universe Publishing and Zhejiang Daily Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Daily Media and Chinese Universe 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 Chinese Universe Publishing are associated (or correlated) with Zhejiang Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Daily Media has no effect on the direction of Chinese Universe i.e., Chinese Universe and Zhejiang Daily go up and down completely randomly.

Pair Corralation between Chinese Universe and Zhejiang Daily

Assuming the 90 days trading horizon Chinese Universe Publishing is expected to generate 0.9 times more return on investment than Zhejiang Daily. However, Chinese Universe Publishing is 1.11 times less risky than Zhejiang Daily. It trades about 0.04 of its potential returns per unit of risk. Zhejiang Daily Media is currently generating about 0.03 per unit of risk. If you would invest  906.00  in Chinese Universe Publishing on September 28, 2024 and sell it today you would earn a total of  375.00  from holding Chinese Universe Publishing or generate 41.39% return on investment over 90 days.

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

Chinese Universe Publishing  vs.  Zhejiang Daily Media

Chinese Universe Pub

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Universe Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Zhejiang Daily Media

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Daily Media are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Daily may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chinese Universe and Zhejiang Daily

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

The idea behind Chinese Universe Publishing and Zhejiang Daily Media 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 Global Correlations module to find global opportunities by holding instruments from different markets.