Correlation Between National Silicon and Zhejiang Qianjiang

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

By analyzing existing cross correlation between National Silicon Industry and Zhejiang Qianjiang Motorcycle, you can compare the effects of market volatilities on National Silicon and Zhejiang Qianjiang 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 National Silicon with a short position of Zhejiang Qianjiang. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Silicon and Zhejiang Qianjiang.

Diversification Opportunities for National Silicon and Zhejiang Qianjiang

0.77

Correlation Coefficient

National Silicon  Zhejiang Qianjiang

Poor diversification

The 3 months correlation between National and Zhejiang is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding National Silicon Industry and Zhejiang Qianjiang Motorcycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Qianjiang and National Silicon 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 National Silicon Industry are associated (or correlated) with Zhejiang Qianjiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Qianjiang has no effect on the direction of National Silicon i.e., National Silicon and Zhejiang Qianjiang go up and down completely randomly.

Pair Corralation between National Silicon and Zhejiang Qianjiang

Assuming the 90 days trading horizon National Silicon Industry is expected to generate 1.82 times more return on investment than Zhejiang Qianjiang. However, National Silicon is 1.82 times more volatile than Zhejiang Qianjiang Motorcycle. It trades about 0.15 of its potential returns per unit of risk. Zhejiang Qianjiang Motorcycle is currently generating about 0.03 per unit of risk. If you would invest  1,418  in National Silicon Industry on August 31, 2024 and sell it today you would earn a total of  679.00  from holding National Silicon Industry or generate 47.88% return on investment over 90 days.

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

National Silicon Industry  vs.  Zhejiang Qianjiang Motorcycle

National Silicon Industry

Risk-Adjusted Performance

11 of 100

Good

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

Zhejiang Qianjiang

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Qianjiang Motorcycle are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhejiang Qianjiang is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with National Silicon and Zhejiang Qianjiang

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

The idea behind National Silicon Industry and Zhejiang Qianjiang Motorcycle 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.