Correlation Between Zhongfu Information and Sinofibers Technology

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

Diversification Opportunities for Zhongfu Information and Sinofibers Technology

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Zhongfu and Sinofibers is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Zhongfu Information and Sinofibers Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinofibers Technology and Zhongfu Information 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 Zhongfu Information are associated (or correlated) with Sinofibers Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinofibers Technology has no effect on the direction of Zhongfu Information i.e., Zhongfu Information and Sinofibers Technology go up and down completely randomly.

Pair Corralation between Zhongfu Information and Sinofibers Technology

Assuming the 90 days trading horizon Zhongfu Information is expected to generate 1.24 times more return on investment than Sinofibers Technology. However, Zhongfu Information is 1.24 times more volatile than Sinofibers Technology Co. It trades about 0.03 of its potential returns per unit of risk. Sinofibers Technology Co is currently generating about 0.03 per unit of risk. If you would invest  1,469  in Zhongfu Information on October 12, 2024 and sell it today you would earn a total of  83.00  from holding Zhongfu Information or generate 5.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Zhongfu Information  vs.  Sinofibers Technology Co

 Performance 
       Timeline  
Zhongfu Information 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Zhongfu Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhongfu Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Sinofibers Technology 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Sinofibers Technology Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sinofibers Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhongfu Information and Sinofibers Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Zhongfu Information and Sinofibers Technology

The main advantage of trading using opposite Zhongfu Information and Sinofibers Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongfu Information position performs unexpectedly, Sinofibers Technology 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 Sinofibers Technology will offset losses from the drop in Sinofibers Technology's long position.
The idea behind Zhongfu Information and Sinofibers Technology Co 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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