Correlation Between Runjian Communication and BlueFocus Communication

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

By analyzing existing cross correlation between Runjian Communication Co and BlueFocus Communication Group, you can compare the effects of market volatilities on Runjian Communication and BlueFocus Communication 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 Runjian Communication with a short position of BlueFocus Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Runjian Communication and BlueFocus Communication.

Diversification Opportunities for Runjian Communication and BlueFocus Communication

-0.08

Correlation Coefficient

Runjian Communication  BlueFocus Communication

Good diversification

The 3 months correlation between Runjian and BlueFocus is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Runjian Communication Co and BlueFocus Communication Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueFocus Communication and Runjian Communication 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 Runjian Communication Co are associated (or correlated) with BlueFocus Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueFocus Communication has no effect on the direction of Runjian Communication i.e., Runjian Communication and BlueFocus Communication go up and down completely randomly.

Pair Corralation between Runjian Communication and BlueFocus Communication

Assuming the 90 days trading horizon Runjian Communication Co is expected to generate 0.95 times more return on investment than BlueFocus Communication. However, Runjian Communication Co is 1.05 times less risky than BlueFocus Communication. It trades about 0.31 of its potential returns per unit of risk. BlueFocus Communication Group is currently generating about -0.04 per unit of risk. If you would invest  2,982  in Runjian Communication Co on November 29, 2024 and sell it today you would earn a total of  3,366  from holding Runjian Communication Co or generate 112.88% return on investment over 90 days.

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

Runjian Communication Co  vs.  BlueFocus Communication Group

Runjian Communication

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Runjian Communication Co are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Runjian Communication sustained solid returns over the last few months and may actually be approaching a breakup point.

BlueFocus Communication

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlueFocus Communication Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Runjian Communication and BlueFocus Communication

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

The idea behind Runjian Communication Co and BlueFocus Communication Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.