Correlation Between Chongqing Changan and Glodon Software

Can any of the company-specific risk be diversified away by investing in both Chongqing Changan and Glodon 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 Chongqing Changan and Glodon Software 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 Glodon Software Co, you can compare the effects of market volatilities on Chongqing Changan and Glodon 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 Chongqing Changan with a short position of Glodon Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Changan and Glodon Software.

Diversification Opportunities for Chongqing Changan and Glodon Software

0.35

Correlation Coefficient

Chongqing Changan  Glodon Software

Weak diversification

The 3 months correlation between Chongqing and Glodon is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Changan Automobile and Glodon Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glodon Software 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 Glodon Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glodon Software has no effect on the direction of Chongqing Changan i.e., Chongqing Changan and Glodon Software go up and down completely randomly.

Pair Corralation between Chongqing Changan and Glodon Software

Assuming the 90 days trading horizon Chongqing Changan Automobile is expected to under-perform the Glodon Software. But the stock apears to be less risky and, when comparing its historical volatility, Chongqing Changan Automobile is 1.89 times less risky than Glodon Software. The stock trades about -0.07 of its potential returns per unit of risk. The Glodon Software Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,205  in Glodon Software Co on December 25, 2024 and sell it today you would earn a total of  197.00  from holding Glodon Software Co or generate 16.35% return on investment over 90 days.

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

Chongqing Changan Automobile  vs.  Glodon Software Co

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Glodon Software

Risk-Adjusted Performance

Modest

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

Pair Trading with Chongqing Changan and Glodon Software

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

The idea behind Chongqing Changan Automobile and Glodon 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.