Correlation Between Keyang Electric and ATON

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

By analyzing existing cross correlation between Keyang Electric Machinery and ATON Inc, you can compare the effects of market volatilities on Keyang Electric and ATON 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 Keyang Electric with a short position of ATON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keyang Electric and ATON.

Diversification Opportunities for Keyang Electric and ATON

-0.23

Correlation Coefficient

Keyang Electric  ATON

Very good diversification

The 3 months correlation between Keyang and ATON is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Keyang Electric Machinery and ATON Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATON Inc and Keyang Electric 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 Keyang Electric Machinery are associated (or correlated) with ATON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATON Inc has no effect on the direction of Keyang Electric i.e., Keyang Electric and ATON go up and down completely randomly.

Pair Corralation between Keyang Electric and ATON

Assuming the 90 days trading horizon Keyang Electric is expected to generate 1.6 times less return on investment than ATON. But when comparing it to its historical volatility, Keyang Electric Machinery is 3.57 times less risky than ATON. It trades about 0.28 of its potential returns per unit of risk. ATON Inc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  576,859  in ATON Inc on October 12, 2024 and sell it today you would earn a total of  94,141  from holding ATON Inc or generate 16.32% return on investment over 90 days.

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

Keyang Electric Machinery  vs.  ATON Inc

Keyang Electric Machinery

Risk-Adjusted Performance

1 of 100

Weak

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

ATON Inc

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Keyang Electric and ATON

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

The idea behind Keyang Electric Machinery and ATON Inc 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.