Correlation Between North American and Zhongsheng Group
Can any of the company-specific risk be diversified away by investing in both North American and Zhongsheng Group 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 North American and Zhongsheng Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Zhongsheng Group Holdings, you can compare the effects of market volatilities on North American and Zhongsheng Group 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 North American with a short position of Zhongsheng Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Zhongsheng Group.
Diversification Opportunities for North American and Zhongsheng Group
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between North and Zhongsheng is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Zhongsheng Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongsheng Group Holdings and North American 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 North American Construction are associated (or correlated) with Zhongsheng Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongsheng Group Holdings has no effect on the direction of North American i.e., North American and Zhongsheng Group go up and down completely randomly.
Pair Corralation between North American and Zhongsheng Group
Assuming the 90 days horizon North American is expected to generate 1.43 times less return on investment than Zhongsheng Group. But when comparing it to its historical volatility, North American Construction is 2.26 times less risky than Zhongsheng Group. It trades about 0.05 of its potential returns per unit of risk. Zhongsheng Group Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 155.00 in Zhongsheng Group Holdings on September 12, 2024 and sell it today you would earn a total of 42.00 from holding Zhongsheng Group Holdings or generate 27.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. Zhongsheng Group Holdings
Performance |
| Timeline |
| North American Const |
| Zhongsheng Group Holdings |
North American and Zhongsheng Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Zhongsheng Group
The main advantage of trading using opposite North American and Zhongsheng Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, Zhongsheng Group 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 Zhongsheng Group will offset losses from the drop in Zhongsheng Group's long position.| North American vs. Tenaris SA | North American vs. NOV Inc | North American vs. Superior Plus Corp | North American vs. SIVERS SEMICONDUCTORS AB |
| Zhongsheng Group vs. Penta Ocean Construction Co | Zhongsheng Group vs. North American Construction | Zhongsheng Group vs. TITAN MACHINERY | Zhongsheng Group vs. Perseus Mining Limited |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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