Correlation Between Glodon Software and ChengDu Hi

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

By analyzing existing cross correlation between Glodon Software Co and ChengDu Hi Tech Development, you can compare the effects of market volatilities on Glodon Software and ChengDu Hi 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 Glodon Software with a short position of ChengDu Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glodon Software and ChengDu Hi.

Diversification Opportunities for Glodon Software and ChengDu Hi

0.84

Correlation Coefficient

Glodon Software  ChengDu Hi

Very poor diversification

The 3 months correlation between Glodon and ChengDu is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Glodon Software Co and ChengDu Hi Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChengDu Hi Tech and Glodon Software 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 Glodon Software Co are associated (or correlated) with ChengDu Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChengDu Hi Tech has no effect on the direction of Glodon Software i.e., Glodon Software and ChengDu Hi go up and down completely randomly.

Pair Corralation between Glodon Software and ChengDu Hi

Assuming the 90 days trading horizon Glodon Software Co is expected to under-perform the ChengDu Hi. But the stock apears to be less risky and, when comparing its historical volatility, Glodon Software Co is 1.23 times less risky than ChengDu Hi. The stock trades about -0.11 of its potential returns per unit of risk. The ChengDu Hi Tech Development is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  7,207  in ChengDu Hi Tech Development on September 25, 2024 and sell it today you would lose (1,077) from holding ChengDu Hi Tech Development or give up 14.94% of portfolio value over 90 days.

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

Glodon Software Co  vs.  ChengDu Hi Tech Development

Glodon Software

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Glodon Software Co are ranked lower than 7 (%) 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.

ChengDu Hi Tech

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ChengDu Hi Tech Development are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ChengDu Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Glodon Software and ChengDu Hi

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

The idea behind Glodon Software Co and ChengDu Hi Tech Development 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.