Correlation Between China Nonferrous and Runjian Communication

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

By analyzing existing cross correlation between China Nonferrous Metal and Runjian Communication Co, you can compare the effects of market volatilities on China Nonferrous and Runjian 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 China Nonferrous with a short position of Runjian Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Nonferrous and Runjian Communication.

Diversification Opportunities for China Nonferrous and Runjian Communication

-0.03

Correlation Coefficient

China Nonferrous  Runjian Communication

Good diversification

The 3 months correlation between China and Runjian is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding China Nonferrous Metal and Runjian Communication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Runjian Communication and China Nonferrous 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 China Nonferrous Metal are associated (or correlated) with Runjian Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Runjian Communication has no effect on the direction of China Nonferrous i.e., China Nonferrous and Runjian Communication go up and down completely randomly.

Pair Corralation between China Nonferrous and Runjian Communication

Assuming the 90 days trading horizon China Nonferrous Metal is expected to under-perform the Runjian Communication. But the stock apears to be less risky and, when comparing its historical volatility, China Nonferrous Metal is 2.2 times less risky than Runjian Communication. The stock trades about -0.22 of its potential returns per unit of risk. The Runjian Communication Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,094  in Runjian Communication Co on October 9, 2024 and sell it today you would lose (120.00) from holding Runjian Communication Co or give up 3.88% of portfolio value over 90 days.

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

China Nonferrous Metal  vs.  Runjian Communication Co

China Nonferrous Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Runjian Communication

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Nonferrous and Runjian Communication

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

The idea behind China Nonferrous Metal and Runjian Communication 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.