Correlation Between Ping An and Zoy Home

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

By analyzing existing cross correlation between Ping An Insurance and Zoy Home Furnishing, you can compare the effects of market volatilities on Ping An and Zoy Home 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 Ping An with a short position of Zoy Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ping An and Zoy Home.

Diversification Opportunities for Ping An and Zoy Home

0.65

Correlation Coefficient

Ping An  Zoy Home

Poor diversification

The 3 months correlation between Ping and Zoy is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and Zoy Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoy Home Furnishing and Ping An 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 Ping An Insurance are associated (or correlated) with Zoy Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoy Home Furnishing has no effect on the direction of Ping An i.e., Ping An and Zoy Home go up and down completely randomly.

Pair Corralation between Ping An and Zoy Home

Assuming the 90 days trading horizon Ping An Insurance is expected to under-perform the Zoy Home. But the stock apears to be less risky and, when comparing its historical volatility, Ping An Insurance is 1.46 times less risky than Zoy Home. The stock trades about -0.1 of its potential returns per unit of risk. The Zoy Home Furnishing is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,064  in Zoy Home Furnishing on September 16, 2024 and sell it today you would earn a total of  182.00  from holding Zoy Home Furnishing or generate 17.11% return on investment over 90 days.

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

Ping An Insurance  vs.  Zoy Home Furnishing

Ping An Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ping An sustained solid returns over the last few months and may actually be approaching a breakup point.

Zoy Home Furnishing

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zoy Home Furnishing are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoy Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ping An and Zoy Home

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

The idea behind Ping An Insurance and Zoy Home Furnishing 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.