Correlation Between Zhejiang Expressway and Sichuan Expressway
Can any of the company-specific risk be diversified away by investing in both Zhejiang Expressway and Sichuan Expressway 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 Zhejiang Expressway and Sichuan Expressway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zhejiang Expressway Co and Sichuan Expressway, you can compare the effects of market volatilities on Zhejiang Expressway and Sichuan Expressway 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 Zhejiang Expressway with a short position of Sichuan Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Expressway and Sichuan Expressway.
Diversification Opportunities for Zhejiang Expressway and Sichuan Expressway
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Zhejiang and Sichuan is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Expressway Co and Sichuan Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Expressway and Zhejiang Expressway 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 Zhejiang Expressway Co are associated (or correlated) with Sichuan Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Expressway has no effect on the direction of Zhejiang Expressway i.e., Zhejiang Expressway and Sichuan Expressway go up and down completely randomly.
Pair Corralation between Zhejiang Expressway and Sichuan Expressway
Assuming the 90 days horizon Zhejiang Expressway Co is expected to generate 4.8 times more return on investment than Sichuan Expressway. However, Zhejiang Expressway is 4.8 times more volatile than Sichuan Expressway. It trades about 0.05 of its potential returns per unit of risk. Sichuan Expressway is currently generating about 0.09 per unit of risk. If you would invest 60.00 in Zhejiang Expressway Co on November 2, 2024 and sell it today you would earn a total of 5.00 from holding Zhejiang Expressway Co or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 27.89% |
| Values | Daily Returns |
Zhejiang Expressway Co vs. Sichuan Expressway
Performance |
| Timeline |
| Zhejiang Expressway |
| Sichuan Expressway |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Zhejiang Expressway and Sichuan Expressway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhejiang Expressway and Sichuan Expressway
The main advantage of trading using opposite Zhejiang Expressway and Sichuan Expressway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhejiang Expressway position performs unexpectedly, Sichuan Expressway 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 Sichuan Expressway will offset losses from the drop in Sichuan Expressway's long position.The idea behind Zhejiang Expressway Co and Sichuan Expressway 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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