Correlation Between Hotai and ZongTai Real
Can any of the company-specific risk be diversified away by investing in both Hotai and ZongTai Real 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 Hotai and ZongTai Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hotai Motor Co and ZongTai Real Estate, you can compare the effects of market volatilities on Hotai and ZongTai Real 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 Hotai with a short position of ZongTai Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotai and ZongTai Real.
Diversification Opportunities for Hotai and ZongTai Real
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hotai and ZongTai is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hotai Motor Co and ZongTai Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZongTai Real Estate and Hotai 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 Hotai Motor Co are associated (or correlated) with ZongTai Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZongTai Real Estate has no effect on the direction of Hotai i.e., Hotai and ZongTai Real go up and down completely randomly.
Pair Corralation between Hotai and ZongTai Real
Assuming the 90 days trading horizon Hotai Motor Co is expected to under-perform the ZongTai Real. But the stock apears to be less risky and, when comparing its historical volatility, Hotai Motor Co is 1.18 times less risky than ZongTai Real. The stock trades about -0.12 of its potential returns per unit of risk. The ZongTai Real Estate is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,230 in ZongTai Real Estate on September 2, 2024 and sell it today you would earn a total of 205.00 from holding ZongTai Real Estate or generate 6.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hotai Motor Co vs. ZongTai Real Estate
Performance |
| Timeline |
| Hotai Motor |
| ZongTai Real Estate |
Hotai and ZongTai Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hotai and ZongTai Real
The main advantage of trading using opposite Hotai and ZongTai Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hotai position performs unexpectedly, ZongTai Real 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 ZongTai Real will offset losses from the drop in ZongTai Real's long position.| Hotai vs. President Chain Store | Hotai vs. Formosa Petrochemical Corp | Hotai vs. Cheng Shin Rubber | Hotai vs. Formosa Chemicals Fibre |
| ZongTai Real vs. Hunya Foods Co | ZongTai Real vs. Standard Foods Corp | ZongTai Real vs. First Insurance Co | ZongTai Real vs. Kao Fong Machinery |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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