Correlation Between CN MODERN and PKSHA TECHNOLOGY

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

By analyzing existing cross correlation between CN MODERN DAIRY and PKSHA TECHNOLOGY INC, you can compare the effects of market volatilities on CN MODERN and PKSHA 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 CN MODERN with a short position of PKSHA TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and PKSHA TECHNOLOGY.

Diversification Opportunities for CN MODERN and PKSHA TECHNOLOGY

0.31

Correlation Coefficient

CN MODERN  PKSHA TECHNOLOGY

Weak diversification

The 3 months correlation between 07M and PKSHA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and PKSHA TECHNOLOGY INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKSHA TECHNOLOGY INC and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with PKSHA TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKSHA TECHNOLOGY INC has no effect on the direction of CN MODERN i.e., CN MODERN and PKSHA TECHNOLOGY go up and down completely randomly.

Pair Corralation between CN MODERN and PKSHA TECHNOLOGY

Assuming the 90 days trading horizon CN MODERN DAIRY is expected to generate 1.05 times more return on investment than PKSHA TECHNOLOGY. However, CN MODERN is 1.05 times more volatile than PKSHA TECHNOLOGY INC. It trades about 0.22 of its potential returns per unit of risk. PKSHA TECHNOLOGY INC is currently generating about 0.11 per unit of risk. If you would invest  9.25  in CN MODERN DAIRY on September 23, 2024 and sell it today you would earn a total of  1.75  from holding CN MODERN DAIRY or generate 18.92% return on investment over 90 days.

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

CN MODERN DAIRY  vs.  PKSHA TECHNOLOGY INC

CN MODERN DAIRY

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, CN MODERN exhibited solid returns over the last few months and may actually be approaching a breakup point.

PKSHA TECHNOLOGY INC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PKSHA TECHNOLOGY INC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PKSHA TECHNOLOGY reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CN MODERN and PKSHA TECHNOLOGY

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

The idea behind CN MODERN DAIRY and PKSHA TECHNOLOGY 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.