Correlation Between Chong Hong and Zinwell

Can any of the company-specific risk be diversified away by investing in both Chong Hong and Zinwell 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 Chong Hong and Zinwell into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chong Hong Construction and Zinwell, you can compare the effects of market volatilities on Chong Hong and Zinwell 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 Chong Hong with a short position of Zinwell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chong Hong and Zinwell.

Diversification Opportunities for Chong Hong and Zinwell

-0.31

Correlation Coefficient

Chong Hong  Zinwell

Very good diversification

The 3 months correlation between Chong and Zinwell is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Chong Hong Construction and Zinwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zinwell and Chong Hong 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 Chong Hong Construction are associated (or correlated) with Zinwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zinwell has no effect on the direction of Chong Hong i.e., Chong Hong and Zinwell go up and down completely randomly.

Pair Corralation between Chong Hong and Zinwell

Assuming the 90 days trading horizon Chong Hong Construction is expected to under-perform the Zinwell. In addition to that, Chong Hong is 1.86 times more volatile than Zinwell. It trades about -0.07 of its total potential returns per unit of risk. Zinwell is currently generating about 0.17 per unit of volatility. If you would invest  1,995  in Zinwell on April 7, 2024 and sell it today you would earn a total of  225.00  from holding Zinwell or generate 11.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Chong Hong Construction  vs.  Zinwell

Chong Hong Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chong Hong Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chong Hong showed solid returns over the last few months and may actually be approaching a breakup point.

Zinwell

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zinwell are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Zinwell may actually be approaching a critical reversion point that can send shares even higher in August 2024.

Pair Trading with Chong Hong and Zinwell

The main advantage of trading using opposite Chong Hong and Zinwell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chong Hong position performs unexpectedly, Zinwell 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 Zinwell will offset losses from the drop in Zinwell's long position.

The idea behind Chong Hong Construction and Zinwell 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.