Correlation Between Runjian Communication and Montage Technology

Can any of the company-specific risk be diversified away by investing in both Runjian Communication and Montage Technology 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 Montage Technology 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 Montage Technology Co, you can compare the effects of market volatilities on Runjian Communication and Montage Technology 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 Montage Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Runjian Communication and Montage Technology.

Diversification Opportunities for Runjian Communication and Montage Technology

0.7

Correlation Coefficient

Runjian Communication  Montage Technology

Poor diversification

The 3 months correlation between Runjian and Montage is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Runjian Communication Co and Montage Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montage Technology 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 Montage Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montage Technology has no effect on the direction of Runjian Communication i.e., Runjian Communication and Montage Technology go up and down completely randomly.

Pair Corralation between Runjian Communication and Montage Technology

Assuming the 90 days trading horizon Runjian Communication Co is expected to generate 0.77 times more return on investment than Montage Technology. However, Runjian Communication Co is 1.3 times less risky than Montage Technology. It trades about 0.03 of its potential returns per unit of risk. Montage Technology Co is currently generating about 0.01 per unit of risk. If you would invest  2,980  in Runjian Communication Co on October 12, 2024 and sell it today you would earn a total of  70.00  from holding Runjian Communication Co or generate 2.35% return on investment over 90 days.

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

Runjian Communication Co  vs.  Montage Technology Co

Runjian Communication

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Runjian Communication Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Runjian Communication is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Montage Technology

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Runjian Communication and Montage Technology

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

The idea behind Runjian Communication Co and Montage Technology 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.