Correlation Between Sinotrans and Zangge Holding

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

By analyzing existing cross correlation between Sinotrans Ltd Class and Zangge Holding Co, you can compare the effects of market volatilities on Sinotrans and Zangge Holding 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 Sinotrans with a short position of Zangge Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinotrans and Zangge Holding.

Diversification Opportunities for Sinotrans and Zangge Holding

0.76

Correlation Coefficient

Sinotrans  Zangge Holding

Poor diversification

The 3 months correlation between Sinotrans and Zangge is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sinotrans Ltd Class and Zangge Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zangge Holding and Sinotrans 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 Sinotrans Ltd Class are associated (or correlated) with Zangge Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zangge Holding has no effect on the direction of Sinotrans i.e., Sinotrans and Zangge Holding go up and down completely randomly.

Pair Corralation between Sinotrans and Zangge Holding

Assuming the 90 days trading horizon Sinotrans is expected to generate 1.16 times less return on investment than Zangge Holding. But when comparing it to its historical volatility, Sinotrans Ltd Class is 1.08 times less risky than Zangge Holding. It trades about 0.09 of its potential returns per unit of risk. Zangge Holding Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,391  in Zangge Holding Co on September 23, 2024 and sell it today you would earn a total of  317.00  from holding Zangge Holding Co or generate 13.26% return on investment over 90 days.

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

Sinotrans Ltd Class  vs.  Zangge Holding Co

Sinotrans Class

Risk-Adjusted Performance

7 of 100

OK

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

Zangge Holding

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Sinotrans and Zangge Holding

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

The idea behind Sinotrans Ltd Class and Zangge Holding 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.