Correlation Between De Rucci and Chongqing Changan

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

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

Diversification Opportunities for De Rucci and Chongqing Changan

0.55

Correlation Coefficient

De Rucci  Chongqing Changan

Very weak diversification

The 3 months correlation between 001323 and Chongqing is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding De Rucci Healthy and Chongqing Changan Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Changan and De Rucci 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 De Rucci Healthy are associated (or correlated) with Chongqing Changan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Changan has no effect on the direction of De Rucci i.e., De Rucci and Chongqing Changan go up and down completely randomly.

Pair Corralation between De Rucci and Chongqing Changan

Assuming the 90 days trading horizon De Rucci Healthy is expected to generate 1.13 times more return on investment than Chongqing Changan. However, De Rucci is 1.13 times more volatile than Chongqing Changan Automobile. It trades about 0.07 of its potential returns per unit of risk. Chongqing Changan Automobile is currently generating about -0.02 per unit of risk. If you would invest  3,001  in De Rucci Healthy on September 7, 2024 and sell it today you would earn a total of  918.00  from holding De Rucci Healthy or generate 30.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.58%
Values	Daily Returns

De Rucci Healthy  vs.  Chongqing Changan Automobile

De Rucci Healthy

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in De Rucci Healthy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, De Rucci sustained solid returns over the last few months and may actually be approaching a breakup point.

Chongqing Changan

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with De Rucci and Chongqing Changan

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

The idea behind De Rucci Healthy and Chongqing Changan Automobile 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..