Correlation Between Zoy Home and Zhangjiagang Elegant

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

By analyzing existing cross correlation between Zoy Home Furnishing and Zhangjiagang Elegant Home, you can compare the effects of market volatilities on Zoy Home and Zhangjiagang Elegant 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 Zoy Home with a short position of Zhangjiagang Elegant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoy Home and Zhangjiagang Elegant.

Diversification Opportunities for Zoy Home and Zhangjiagang Elegant

0.92

Correlation Coefficient

Zoy Home  Zhangjiagang Elegant

Almost no diversification

The 3 months correlation between Zoy and Zhangjiagang is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Zoy Home Furnishing and Zhangjiagang Elegant Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangjiagang Elegant Home and Zoy Home 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 Zoy Home Furnishing are associated (or correlated) with Zhangjiagang Elegant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangjiagang Elegant Home has no effect on the direction of Zoy Home i.e., Zoy Home and Zhangjiagang Elegant go up and down completely randomly.

Pair Corralation between Zoy Home and Zhangjiagang Elegant

Assuming the 90 days trading horizon Zoy Home is expected to generate 1.09 times less return on investment than Zhangjiagang Elegant. In addition to that, Zoy Home is 1.05 times more volatile than Zhangjiagang Elegant Home. It trades about 0.15 of its total potential returns per unit of risk. Zhangjiagang Elegant Home is currently generating about 0.18 per unit of volatility. If you would invest  931.00  in Zhangjiagang Elegant Home on September 19, 2024 and sell it today you would earn a total of  104.00  from holding Zhangjiagang Elegant Home or generate 11.17% return on investment over 90 days.

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

Zoy Home Furnishing  vs.  Zhangjiagang Elegant Home

Zoy Home Furnishing

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoy Home Furnishing are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoy Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhangjiagang Elegant Home

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhangjiagang Elegant Home are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhangjiagang Elegant sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zoy Home and Zhangjiagang Elegant

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

The idea behind Zoy Home Furnishing and Zhangjiagang Elegant Home 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.