Correlation Between Changchun and Allwin Telecommunicatio

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

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

Diversification Opportunities for Changchun and Allwin Telecommunicatio

0.34

Correlation Coefficient

Changchun  Allwin Telecommunicatio

Weak diversification

The 3 months correlation between Changchun and Allwin is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Changchun UP Optotech and Allwin Telecommunication Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allwin Telecommunicatio and Changchun 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 Changchun UP Optotech are associated (or correlated) with Allwin Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allwin Telecommunicatio has no effect on the direction of Changchun i.e., Changchun and Allwin Telecommunicatio go up and down completely randomly.

Pair Corralation between Changchun and Allwin Telecommunicatio

Assuming the 90 days trading horizon Changchun UP Optotech is expected to generate 0.82 times more return on investment than Allwin Telecommunicatio. However, Changchun UP Optotech is 1.22 times less risky than Allwin Telecommunicatio. It trades about 0.07 of its potential returns per unit of risk. Allwin Telecommunication Co is currently generating about 0.03 per unit of risk. If you would invest  3,177  in Changchun UP Optotech on October 11, 2024 and sell it today you would earn a total of  458.00  from holding Changchun UP Optotech or generate 14.42% return on investment over 90 days.

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

Changchun UP Optotech  vs.  Allwin Telecommunication Co

Changchun UP Optotech

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun sustained solid returns over the last few months and may actually be approaching a breakup point.

Allwin Telecommunicatio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Allwin Telecommunication Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allwin Telecommunicatio may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Changchun and Allwin Telecommunicatio

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

The idea behind Changchun UP Optotech and Allwin Telecommunication 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.