Correlation Between Gome Telecom and Zoomlion Heavy

Can any of the company-specific risk be diversified away by investing in both Gome Telecom and Zoomlion Heavy 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 Gome Telecom and Zoomlion Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gome Telecom Equipment and Zoomlion Heavy Industry, you can compare the effects of market volatilities on Gome Telecom and Zoomlion Heavy 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 Gome Telecom with a short position of Zoomlion Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gome Telecom and Zoomlion Heavy.

Diversification Opportunities for Gome Telecom and Zoomlion Heavy

0.08

Correlation Coefficient

Gome Telecom  Zoomlion Heavy

Significant diversification

The 3 months correlation between Gome and Zoomlion is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Gome Telecom Equipment and Zoomlion Heavy Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoomlion Heavy Industry and Gome Telecom 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 Gome Telecom Equipment are associated (or correlated) with Zoomlion Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoomlion Heavy Industry has no effect on the direction of Gome Telecom i.e., Gome Telecom and Zoomlion Heavy go up and down completely randomly.

Pair Corralation between Gome Telecom and Zoomlion Heavy

Assuming the 90 days trading horizon Gome Telecom Equipment is expected to under-perform the Zoomlion Heavy. In addition to that, Gome Telecom is 1.44 times more volatile than Zoomlion Heavy Industry. It trades about -0.05 of its total potential returns per unit of risk. Zoomlion Heavy Industry is currently generating about 0.1 per unit of volatility. If you would invest  610.00  in Zoomlion Heavy Industry on September 23, 2024 and sell it today you would earn a total of  81.00  from holding Zoomlion Heavy Industry or generate 13.28% return on investment over 90 days.

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

Gome Telecom Equipment  vs.  Zoomlion Heavy Industry

Gome Telecom Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gome Telecom Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Zoomlion Heavy Industry

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zoomlion Heavy Industry are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoomlion Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gome Telecom and Zoomlion Heavy

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

The idea behind Gome Telecom Equipment and Zoomlion Heavy Industry 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.