Correlation Between SPORTING and ZTE
Can any of the company-specific risk be diversified away by investing in both SPORTING and ZTE 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 SPORTING and ZTE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPORTING and ZTE Corporation, you can compare the effects of market volatilities on SPORTING and ZTE 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 SPORTING with a short position of ZTE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPORTING and ZTE.
Diversification Opportunities for SPORTING and ZTE
Poor diversification
The 3 months correlation between SPORTING and ZTE is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SPORTING and ZTE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTE Corporation and SPORTING 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 SPORTING are associated (or correlated) with ZTE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTE Corporation has no effect on the direction of SPORTING i.e., SPORTING and ZTE go up and down completely randomly.
Pair Corralation between SPORTING and ZTE
Assuming the 90 days trading horizon SPORTING is expected to generate 4.4 times less return on investment than ZTE. But when comparing it to its historical volatility, SPORTING is 2.03 times less risky than ZTE. It trades about 0.03 of its potential returns per unit of risk. ZTE Corporation is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 124.00 in ZTE Corporation on September 12, 2024 and sell it today you would earn a total of 106.00 from holding ZTE Corporation or generate 85.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPORTING vs. ZTE Corp.
Performance |
| Timeline |
| SPORTING |
| ZTE Corporation |
SPORTING and ZTE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPORTING and ZTE
The main advantage of trading using opposite SPORTING and ZTE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORTING position performs unexpectedly, ZTE 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 will offset losses from the drop in ZTE's long position.| SPORTING vs. TAL Education Group | SPORTING vs. PARKEN Sport Entertainment | SPORTING vs. Adtalem Global Education | SPORTING vs. DEVRY EDUCATION GRP |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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