Correlation Between Chengdu Xinzhu and HanS Laser

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

By analyzing existing cross correlation between Chengdu Xinzhu RoadBridge and HanS Laser Tech, you can compare the effects of market volatilities on Chengdu Xinzhu and HanS Laser 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 Chengdu Xinzhu with a short position of HanS Laser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Xinzhu and HanS Laser.

Diversification Opportunities for Chengdu Xinzhu and HanS Laser

0.01

Correlation Coefficient

Chengdu Xinzhu  HanS Laser

Significant diversification

The 3 months correlation between Chengdu and HanS is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Xinzhu RoadBridge and HanS Laser Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HanS Laser Tech and Chengdu Xinzhu 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 Chengdu Xinzhu RoadBridge are associated (or correlated) with HanS Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HanS Laser Tech has no effect on the direction of Chengdu Xinzhu i.e., Chengdu Xinzhu and HanS Laser go up and down completely randomly.

Pair Corralation between Chengdu Xinzhu and HanS Laser

Assuming the 90 days trading horizon Chengdu Xinzhu RoadBridge is expected to generate 1.87 times more return on investment than HanS Laser. However, Chengdu Xinzhu is 1.87 times more volatile than HanS Laser Tech. It trades about 0.02 of its potential returns per unit of risk. HanS Laser Tech is currently generating about 0.02 per unit of risk. If you would invest  516.00  in Chengdu Xinzhu RoadBridge on December 1, 2024 and sell it today you would earn a total of  1.00  from holding Chengdu Xinzhu RoadBridge or generate 0.19% return on investment over 90 days.

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

Chengdu Xinzhu RoadBridge  vs.  HanS Laser Tech

Chengdu Xinzhu RoadBridge

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Xinzhu RoadBridge are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chengdu Xinzhu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HanS Laser Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HanS Laser Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HanS Laser is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chengdu Xinzhu and HanS Laser

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

The idea behind Chengdu Xinzhu RoadBridge and HanS Laser Tech 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.