Correlation Between RoadMain T and ZTE Corp

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

Diversification Opportunities for RoadMain T and ZTE Corp

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between RoadMain and ZTE is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding RoadMain T Co and ZTE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTE Corp and RoadMain T 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 RoadMain T Co are associated (or correlated) with ZTE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTE Corp has no effect on the direction of RoadMain T i.e., RoadMain T and ZTE Corp go up and down completely randomly.

Pair Corralation between RoadMain T and ZTE Corp

Assuming the 90 days trading horizon RoadMain T Co is expected to under-perform the ZTE Corp. But the stock apears to be less risky and, when comparing its historical volatility, RoadMain T Co is 1.4 times less risky than ZTE Corp. The stock trades about -0.23 of its potential returns per unit of risk. The ZTE Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,055  in ZTE Corp on October 14, 2024 and sell it today you would earn a total of  716.00  from holding ZTE Corp or generate 23.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

RoadMain T Co  vs.  ZTE Corp

 Performance 
       Timeline  
RoadMain T 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days RoadMain T Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
ZTE Corp 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ZTE Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ZTE Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

RoadMain T and ZTE Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with RoadMain T and ZTE Corp

The main advantage of trading using opposite RoadMain T and ZTE Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RoadMain T position performs unexpectedly, ZTE Corp 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 ZTE Corp will offset losses from the drop in ZTE Corp's long position.
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The idea behind RoadMain T Co and ZTE Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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