Correlation Between Changshu Ruite and Infore Environment

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

By analyzing existing cross correlation between Changshu Ruite Electric and Infore Environment Technology, you can compare the effects of market volatilities on Changshu Ruite and Infore Environment 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 Changshu Ruite with a short position of Infore Environment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changshu Ruite and Infore Environment.

Diversification Opportunities for Changshu Ruite and Infore Environment

0.67

Correlation Coefficient

Changshu Ruite  Infore Environment

Poor diversification

The 3 months correlation between Changshu and Infore is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Changshu Ruite Electric and Infore Environment Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infore Environment and Changshu Ruite 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 Changshu Ruite Electric are associated (or correlated) with Infore Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infore Environment has no effect on the direction of Changshu Ruite i.e., Changshu Ruite and Infore Environment go up and down completely randomly.

Pair Corralation between Changshu Ruite and Infore Environment

Assuming the 90 days trading horizon Changshu Ruite is expected to generate 1.79 times less return on investment than Infore Environment. But when comparing it to its historical volatility, Changshu Ruite Electric is 2.03 times less risky than Infore Environment. It trades about 0.11 of its potential returns per unit of risk. Infore Environment Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  502.00  in Infore Environment Technology on December 26, 2024 and sell it today you would earn a total of  96.00  from holding Infore Environment Technology or generate 19.12% return on investment over 90 days.

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

Changshu Ruite Electric  vs.  Infore Environment Technology

Changshu Ruite Electric

Risk-Adjusted Performance

OK

Over the last 90 days Changshu Ruite Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Changshu Ruite sustained solid returns over the last few months and may actually be approaching a breakup point.

Infore Environment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Infore Environment Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Infore Environment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Changshu Ruite and Infore Environment

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

The idea behind Changshu Ruite Electric and Infore Environment Technology 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.