Correlation Between Oriental Culture and ZKH Group

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

By analyzing existing cross correlation between Oriental Culture Holding and ZKH Group Limited, you can compare the effects of market volatilities on Oriental Culture and ZKH Group 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 Oriental Culture with a short position of ZKH Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oriental Culture and ZKH Group.

Diversification Opportunities for Oriental Culture and ZKH Group

0.55

Correlation Coefficient

Oriental Culture  ZKH Group

Very weak diversification

The 3 months correlation between Oriental and ZKH is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Culture Holding and ZKH Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZKH Group Limited and Oriental Culture 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 Oriental Culture Holding are associated (or correlated) with ZKH Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZKH Group Limited has no effect on the direction of Oriental Culture i.e., Oriental Culture and ZKH Group go up and down completely randomly.

Pair Corralation between Oriental Culture and ZKH Group

Considering the 90-day investment horizon Oriental Culture Holding is expected to generate 2.63 times more return on investment than ZKH Group. However, Oriental Culture is 2.63 times more volatile than ZKH Group Limited. It trades about 0.07 of its potential returns per unit of risk. ZKH Group Limited is currently generating about 0.09 per unit of risk. If you would invest  110.00  in Oriental Culture Holding on September 14, 2024 and sell it today you would earn a total of  23.00  from holding Oriental Culture Holding or generate 20.91% return on investment over 90 days.

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

Oriental Culture Holding  vs.  ZKH Group Limited

Oriental Culture Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Culture Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Oriental Culture reported solid returns over the last few months and may actually be approaching a breakup point.

ZKH Group Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZKH Group Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward-looking signals, ZKH Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oriental Culture and ZKH Group

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

The idea behind Oriental Culture Holding and ZKH Group Limited 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..