Correlation Between National Silicon and Zhejiang Daily

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

Diversification Opportunities for National Silicon and Zhejiang Daily

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between National and Zhejiang is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding National Silicon Industry and Zhejiang Daily Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Daily Media and National Silicon 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 National Silicon Industry are associated (or correlated) with Zhejiang Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Daily Media has no effect on the direction of National Silicon i.e., National Silicon and Zhejiang Daily go up and down completely randomly.

Pair Corralation between National Silicon and Zhejiang Daily

Assuming the 90 days trading horizon National Silicon is expected to generate 1.93 times less return on investment than Zhejiang Daily. But when comparing it to its historical volatility, National Silicon Industry is 1.18 times less risky than Zhejiang Daily. It trades about 0.02 of its potential returns per unit of risk. Zhejiang Daily Media is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  850.00  in Zhejiang Daily Media on August 30, 2024 and sell it today you would earn a total of  226.00  from holding Zhejiang Daily Media or generate 26.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

National Silicon Industry  vs.  Zhejiang Daily Media

 Performance 
       Timeline  
National Silicon Industry 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in National Silicon Industry are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, National Silicon sustained solid returns over the last few months and may actually be approaching a breakup point.
Zhejiang Daily Media 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Daily Media are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Daily sustained solid returns over the last few months and may actually be approaching a breakup point.

National Silicon and Zhejiang Daily Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Silicon and Zhejiang Daily

The main advantage of trading using opposite National Silicon and Zhejiang Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Silicon position performs unexpectedly, Zhejiang Daily 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 Zhejiang Daily will offset losses from the drop in Zhejiang Daily's long position.
The idea behind National Silicon Industry and Zhejiang Daily Media 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.
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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