Correlation Between Zhejiang Zhaofeng and Tongyu Communication

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

By analyzing existing cross correlation between Zhejiang Zhaofeng Mechanical and Tongyu Communication, you can compare the effects of market volatilities on Zhejiang Zhaofeng and Tongyu Communication 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 Zhaofeng with a short position of Tongyu Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Zhaofeng and Tongyu Communication.

Diversification Opportunities for Zhejiang Zhaofeng and Tongyu Communication

0.7

Correlation Coefficient

Zhejiang Zhaofeng  Tongyu Communication

Poor diversification

The 3 months correlation between Zhejiang and Tongyu is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Zhaofeng Mechanical and Tongyu Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongyu Communication and Zhejiang Zhaofeng 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 Zhaofeng Mechanical are associated (or correlated) with Tongyu Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongyu Communication has no effect on the direction of Zhejiang Zhaofeng i.e., Zhejiang Zhaofeng and Tongyu Communication go up and down completely randomly.

Pair Corralation between Zhejiang Zhaofeng and Tongyu Communication

Assuming the 90 days trading horizon Zhejiang Zhaofeng Mechanical is expected to generate 3.23 times more return on investment than Tongyu Communication. However, Zhejiang Zhaofeng is 3.23 times more volatile than Tongyu Communication. It trades about 0.22 of its potential returns per unit of risk. Tongyu Communication is currently generating about 0.09 per unit of risk. If you would invest  4,347  in Zhejiang Zhaofeng Mechanical on April 24, 2025 and sell it today you would earn a total of  3,926  from holding Zhejiang Zhaofeng Mechanical or generate 90.32% return on investment over 90 days.

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

Zhejiang Zhaofeng Mechanical  vs.  Tongyu Communication

Zhejiang Zhaofeng

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Zhaofeng Mechanical are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Zhaofeng sustained solid returns over the last few months and may actually be approaching a breakup point.

Tongyu Communication

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tongyu Communication are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongyu Communication may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Zhejiang Zhaofeng and Tongyu Communication

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

The idea behind Zhejiang Zhaofeng Mechanical and Tongyu Communication 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.