Correlation Between Zhongrun Resources and China Building

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Can any of the company-specific risk be diversified away by investing in both Zhongrun Resources and China Building 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 Zhongrun Resources and China Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zhongrun Resources Investment and China Building Material, you can compare the effects of market volatilities on Zhongrun Resources and China Building 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 Zhongrun Resources with a short position of China Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongrun Resources and China Building.

Diversification Opportunities for Zhongrun Resources and China Building

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Zhongrun and China is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Zhongrun Resources Investment and China Building Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Building Material and Zhongrun Resources 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 Zhongrun Resources Investment are associated (or correlated) with China Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Building Material has no effect on the direction of Zhongrun Resources i.e., Zhongrun Resources and China Building go up and down completely randomly.

Pair Corralation between Zhongrun Resources and China Building

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to under-perform the China Building. In addition to that, Zhongrun Resources is 1.49 times more volatile than China Building Material. It trades about -0.23 of its total potential returns per unit of risk. China Building Material is currently generating about 0.11 per unit of volatility. If you would invest  736.00  in China Building Material on September 12, 2024 and sell it today you would earn a total of  44.00  from holding China Building Material or generate 5.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Zhongrun Resources Investment  vs.  China Building Material

 Performance 
       Timeline  
Zhongrun Resources 

Risk-Adjusted Performance

29 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongrun Resources sustained solid returns over the last few months and may actually be approaching a breakup point.
China Building Material 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in China Building Material are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Building sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhongrun Resources and China Building Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zhongrun Resources and China Building

The main advantage of trading using opposite Zhongrun Resources and China Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongrun Resources position performs unexpectedly, China Building 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 China Building will offset losses from the drop in China Building's long position.
The idea behind Zhongrun Resources Investment and China Building Material 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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