Correlation Between Hunan TV and Zhongshan Broad

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

Diversification Opportunities for Hunan TV and Zhongshan Broad

0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between Hunan and Zhongshan is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Hunan TV Broadcast and Zhongshan Broad Ocean Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongshan Broad Ocean and Hunan TV 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 Hunan TV Broadcast are associated (or correlated) with Zhongshan Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongshan Broad Ocean has no effect on the direction of Hunan TV i.e., Hunan TV and Zhongshan Broad go up and down completely randomly.

Pair Corralation between Hunan TV and Zhongshan Broad

Assuming the 90 days trading horizon Hunan TV Broadcast is expected to under-perform the Zhongshan Broad. In addition to that, Hunan TV is 1.3 times more volatile than Zhongshan Broad Ocean Motor. It trades about -0.03 of its total potential returns per unit of risk. Zhongshan Broad Ocean Motor is currently generating about 0.31 per unit of volatility. If you would invest  578.00  in Zhongshan Broad Ocean Motor on December 1, 2024 and sell it today you would earn a total of  77.00  from holding Zhongshan Broad Ocean Motor or generate 13.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hunan TV Broadcast  vs.  Zhongshan Broad Ocean Motor

 Performance 
       Timeline  
Hunan TV Broadcast 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Hunan TV Broadcast has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Zhongshan Broad Ocean 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Broad Ocean Motor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Broad sustained solid returns over the last few months and may actually be approaching a breakup point.

Hunan TV and Zhongshan Broad Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hunan TV and Zhongshan Broad

The main advantage of trading using opposite Hunan TV and Zhongshan Broad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hunan TV position performs unexpectedly, Zhongshan Broad 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 Zhongshan Broad will offset losses from the drop in Zhongshan Broad's long position.
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The idea behind Hunan TV Broadcast and Zhongshan Broad Ocean Motor 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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