Correlation Between Changjiang Publishing and Zhongyin Babi

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

Diversification Opportunities for Changjiang Publishing and Zhongyin Babi

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Changjiang and Zhongyin is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Changjiang Publishing Media and Zhongyin Babi Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongyin Babi Food and Changjiang Publishing 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 Changjiang Publishing Media are associated (or correlated) with Zhongyin Babi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongyin Babi Food has no effect on the direction of Changjiang Publishing i.e., Changjiang Publishing and Zhongyin Babi go up and down completely randomly.

Pair Corralation between Changjiang Publishing and Zhongyin Babi

Assuming the 90 days trading horizon Changjiang Publishing is expected to generate 1.23 times less return on investment than Zhongyin Babi. But when comparing it to its historical volatility, Changjiang Publishing Media is 1.63 times less risky than Zhongyin Babi. It trades about 0.08 of its potential returns per unit of risk. Zhongyin Babi Food is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,726  in Zhongyin Babi Food on October 30, 2024 and sell it today you would earn a total of  101.00  from holding Zhongyin Babi Food or generate 5.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Changjiang Publishing Media  vs.  Zhongyin Babi Food

 Performance 
       Timeline  
Changjiang Publishing 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Changjiang Publishing Media are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changjiang Publishing may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Zhongyin Babi Food 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Zhongyin Babi Food are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongyin Babi sustained solid returns over the last few months and may actually be approaching a breakup point.

Changjiang Publishing and Zhongyin Babi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Changjiang Publishing and Zhongyin Babi

The main advantage of trading using opposite Changjiang Publishing and Zhongyin Babi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Changjiang Publishing position performs unexpectedly, Zhongyin Babi 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 Zhongyin Babi will offset losses from the drop in Zhongyin Babi's long position.
The idea behind Changjiang Publishing Media and Zhongyin Babi Food 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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