Correlation Between Financial Street and Inspur Software

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Can any of the company-specific risk be diversified away by investing in both Financial Street and Inspur Software 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 Financial Street and Inspur Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Street Holdings and Inspur Software Co, you can compare the effects of market volatilities on Financial Street and Inspur Software 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 Financial Street with a short position of Inspur Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Street and Inspur Software.

Diversification Opportunities for Financial Street and Inspur Software

FinancialInspurDiversified AwayFinancialInspurDiversified Away100%
0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Financial and Inspur is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Financial Street Holdings and Inspur Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspur Software and Financial Street 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 Financial Street Holdings are associated (or correlated) with Inspur Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspur Software has no effect on the direction of Financial Street i.e., Financial Street and Inspur Software go up and down completely randomly.

Pair Corralation between Financial Street and Inspur Software

Assuming the 90 days trading horizon Financial Street Holdings is expected to under-perform the Inspur Software. But the stock apears to be less risky and, when comparing its historical volatility, Financial Street Holdings is 1.08 times less risky than Inspur Software. The stock trades about -0.12 of its potential returns per unit of risk. The Inspur Software Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,501  in Inspur Software Co on November 23, 2024 and sell it today you would earn a total of  225.00  from holding Inspur Software Co or generate 14.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Financial Street Holdings  vs.  Inspur Software Co

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -25-20-15-10-505
JavaScript chart by amCharts 3.21.15000402 600756
       Timeline  
Financial Street Holdings 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Financial Street Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb33.23.43.63.844.24.4
Inspur Software 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Inspur Software Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inspur Software sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb13141516171819

Financial Street and Inspur Software Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.94-3.7-2.46-1.22-0.01871.082.23.324.445.57 0.0400.0450.050
JavaScript chart by amCharts 3.21.15000402 600756
       Returns  

Pair Trading with Financial Street and Inspur Software

The main advantage of trading using opposite Financial Street and Inspur Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Street position performs unexpectedly, Inspur Software 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 Inspur Software will offset losses from the drop in Inspur Software's long position.
The idea behind Financial Street Holdings and Inspur Software Co 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.
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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