Correlation Between Zhongshan Broad-Ocean and Wuxi Chemical
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By analyzing existing cross correlation between Zhongshan Broad Ocean Motor and Wuxi Chemical Equipment, you can compare the effects of market volatilities on Zhongshan Broad-Ocean and Wuxi Chemical 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 Zhongshan Broad-Ocean with a short position of Wuxi Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongshan Broad-Ocean and Wuxi Chemical.
Diversification Opportunities for Zhongshan Broad-Ocean and Wuxi Chemical
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Zhongshan and Wuxi is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Zhongshan Broad Ocean Motor and Wuxi Chemical Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuxi Chemical Equipment and Zhongshan Broad-Ocean 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 Zhongshan Broad Ocean Motor are associated (or correlated) with Wuxi Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuxi Chemical Equipment has no effect on the direction of Zhongshan Broad-Ocean i.e., Zhongshan Broad-Ocean and Wuxi Chemical go up and down completely randomly.
Pair Corralation between Zhongshan Broad-Ocean and Wuxi Chemical
Assuming the 90 days trading horizon Zhongshan Broad-Ocean is expected to generate 1.18 times less return on investment than Wuxi Chemical. In addition to that, Zhongshan Broad-Ocean is 1.85 times more volatile than Wuxi Chemical Equipment. It trades about 0.14 of its total potential returns per unit of risk. Wuxi Chemical Equipment is currently generating about 0.31 per unit of volatility. If you would invest 3,274 in Wuxi Chemical Equipment on November 7, 2024 and sell it today you would earn a total of 262.00 from holding Wuxi Chemical Equipment or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zhongshan Broad Ocean Motor vs. Wuxi Chemical Equipment
Performance |
| Timeline |
| Zhongshan Broad Ocean |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Wuxi Chemical Equipment |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Zhongshan Broad-Ocean and Wuxi Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhongshan Broad-Ocean and Wuxi Chemical
The main advantage of trading using opposite Zhongshan Broad-Ocean and Wuxi Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongshan Broad-Ocean position performs unexpectedly, Wuxi Chemical 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 Wuxi Chemical will offset losses from the drop in Wuxi Chemical's long position.The idea behind Zhongshan Broad Ocean Motor and Wuxi Chemical Equipment 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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