Correlation Between Grand Pacific and Zhen Ding
Can any of the company-specific risk be diversified away by investing in both Grand Pacific and Zhen Ding 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 Grand Pacific and Zhen Ding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grand Pacific Petrochemical and Zhen Ding Technology, you can compare the effects of market volatilities on Grand Pacific and Zhen Ding 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 Grand Pacific with a short position of Zhen Ding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Pacific and Zhen Ding.
Diversification Opportunities for Grand Pacific and Zhen Ding
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Grand and Zhen is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Grand Pacific Petrochemical and Zhen Ding Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhen Ding Technology and Grand Pacific 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 Grand Pacific Petrochemical are associated (or correlated) with Zhen Ding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhen Ding Technology has no effect on the direction of Grand Pacific i.e., Grand Pacific and Zhen Ding go up and down completely randomly.
Pair Corralation between Grand Pacific and Zhen Ding
Assuming the 90 days trading horizon Grand Pacific Petrochemical is expected to under-perform the Zhen Ding. But the stock apears to be less risky and, when comparing its historical volatility, Grand Pacific Petrochemical is 5.65 times less risky than Zhen Ding. The stock trades about -0.43 of its potential returns per unit of risk. The Zhen Ding Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 11,600 in Zhen Ding Technology on November 3, 2024 and sell it today you would earn a total of 350.00 from holding Zhen Ding Technology or generate 3.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grand Pacific Petrochemical vs. Zhen Ding Technology
Performance |
| Timeline |
| Grand Pacific Petroc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Zhen Ding Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Grand Pacific and Zhen Ding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grand Pacific and Zhen Ding
The main advantage of trading using opposite Grand Pacific and Zhen Ding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Pacific position performs unexpectedly, Zhen Ding 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 Zhen Ding will offset losses from the drop in Zhen Ding's long position.The idea behind Grand Pacific Petrochemical and Zhen Ding Technology 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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