Correlation Between Cloud Live and Changchun

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

By analyzing existing cross correlation between Cloud Live Technology and Changchun UP Optotech, you can compare the effects of market volatilities on Cloud Live and Changchun 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 Cloud Live with a short position of Changchun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cloud Live and Changchun.

Diversification Opportunities for Cloud Live and Changchun

0.53

Correlation Coefficient

Cloud Live  Changchun

Very weak diversification

The 3 months correlation between Cloud and Changchun is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cloud Live Technology and Changchun UP Optotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun UP Optotech and Cloud Live 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 Cloud Live Technology are associated (or correlated) with Changchun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun UP Optotech has no effect on the direction of Cloud Live i.e., Cloud Live and Changchun go up and down completely randomly.

Pair Corralation between Cloud Live and Changchun

Assuming the 90 days trading horizon Cloud Live Technology is expected to under-perform the Changchun. But the stock apears to be less risky and, when comparing its historical volatility, Cloud Live Technology is 1.01 times less risky than Changchun. The stock trades about -0.01 of its potential returns per unit of risk. The Changchun UP Optotech is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,402  in Changchun UP Optotech on October 10, 2024 and sell it today you would earn a total of  1,205  from holding Changchun UP Optotech or generate 50.17% return on investment over 90 days.

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

Cloud Live Technology  vs.  Changchun UP Optotech

Cloud Live Technology

Risk-Adjusted Performance

0 of 100

Weak

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

Changchun UP Optotech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cloud Live and Changchun

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

The idea behind Cloud Live Technology and Changchun UP Optotech 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.