Correlation Between Qinghaihuading Industrial and Henzhen Zhaowei
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By analyzing existing cross correlation between Qinghaihuading Industrial Co and Henzhen Zhaowei Machinery, you can compare the effects of market volatilities on Qinghaihuading Industrial and Henzhen Zhaowei 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 Qinghaihuading Industrial with a short position of Henzhen Zhaowei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qinghaihuading Industrial and Henzhen Zhaowei.
Diversification Opportunities for Qinghaihuading Industrial and Henzhen Zhaowei
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Qinghaihuading and Henzhen is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Qinghaihuading Industrial Co and Henzhen Zhaowei Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henzhen Zhaowei Machinery and Qinghaihuading Industrial 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 Qinghaihuading Industrial Co are associated (or correlated) with Henzhen Zhaowei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henzhen Zhaowei Machinery has no effect on the direction of Qinghaihuading Industrial i.e., Qinghaihuading Industrial and Henzhen Zhaowei go up and down completely randomly.
Pair Corralation between Qinghaihuading Industrial and Henzhen Zhaowei
Assuming the 90 days trading horizon Qinghaihuading Industrial is expected to generate 18.84 times less return on investment than Henzhen Zhaowei. But when comparing it to its historical volatility, Qinghaihuading Industrial Co is 2.87 times less risky than Henzhen Zhaowei. It trades about 0.05 of its potential returns per unit of risk. Henzhen Zhaowei Machinery is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 4,802 in Henzhen Zhaowei Machinery on September 3, 2024 and sell it today you would earn a total of 2,608 from holding Henzhen Zhaowei Machinery or generate 54.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Qinghaihuading Industrial Co vs. Henzhen Zhaowei Machinery
Performance |
| Timeline |
| Qinghaihuading Industrial |
| Henzhen Zhaowei Machinery |
Qinghaihuading Industrial and Henzhen Zhaowei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Qinghaihuading Industrial and Henzhen Zhaowei
The main advantage of trading using opposite Qinghaihuading Industrial and Henzhen Zhaowei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qinghaihuading Industrial position performs unexpectedly, Henzhen Zhaowei 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 Henzhen Zhaowei will offset losses from the drop in Henzhen Zhaowei's long position.The idea behind Qinghaihuading Industrial Co and Henzhen Zhaowei Machinery 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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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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