Correlation Between Chongqing Changan and Wasu Media

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

By analyzing existing cross correlation between Chongqing Changan Automobile and Wasu Media Holding, you can compare the effects of market volatilities on Chongqing Changan and Wasu Media 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 Chongqing Changan with a short position of Wasu Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Changan and Wasu Media.

Diversification Opportunities for Chongqing Changan and Wasu Media

0.58

Correlation Coefficient

Chongqing Changan  Wasu Media

Very weak diversification

The 3 months correlation between Chongqing and Wasu is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Changan Automobile and Wasu Media Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasu Media Holding and Chongqing Changan 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 Chongqing Changan Automobile are associated (or correlated) with Wasu Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasu Media Holding has no effect on the direction of Chongqing Changan i.e., Chongqing Changan and Wasu Media go up and down completely randomly.

Pair Corralation between Chongqing Changan and Wasu Media

Assuming the 90 days trading horizon Chongqing Changan is expected to generate 4.86 times less return on investment than Wasu Media. But when comparing it to its historical volatility, Chongqing Changan Automobile is 2.26 times less risky than Wasu Media. It trades about 0.07 of its potential returns per unit of risk. Wasu Media Holding is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  724.00  in Wasu Media Holding on December 5, 2024 and sell it today you would earn a total of  89.00  from holding Wasu Media Holding or generate 12.29% return on investment over 90 days.

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

Chongqing Changan Automobile  vs.  Wasu Media Holding

Chongqing Changan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chongqing Changan Automobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Chongqing Changan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wasu Media Holding

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wasu Media Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wasu Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Chongqing Changan and Wasu Media

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

The idea behind Chongqing Changan Automobile and Wasu Media Holding 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.