Correlation Between Changshu Ruite and Xingyuan Environment

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

Diversification Opportunities for Changshu Ruite and Xingyuan Environment

0.18

Correlation Coefficient

Changshu Ruite  Xingyuan Environment

Average diversification

The 3 months correlation between Changshu and Xingyuan is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Changshu Ruite Electric and Xingyuan Environment Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xingyuan 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 Xingyuan Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xingyuan Environment has no effect on the direction of Changshu Ruite i.e., Changshu Ruite and Xingyuan Environment go up and down completely randomly.

Pair Corralation between Changshu Ruite and Xingyuan Environment

Assuming the 90 days trading horizon Changshu Ruite Electric is expected to generate 0.63 times more return on investment than Xingyuan Environment. However, Changshu Ruite Electric is 1.58 times less risky than Xingyuan Environment. It trades about 0.09 of its potential returns per unit of risk. Xingyuan Environment Technology is currently generating about -0.08 per unit of risk. If you would invest  760.00  in Changshu Ruite Electric on December 27, 2024 and sell it today you would earn a total of  69.00  from holding Changshu Ruite Electric or generate 9.08% return on investment over 90 days.

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

Changshu Ruite Electric  vs.  Xingyuan Environment Technolog

Changshu Ruite Electric

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Changshu Ruite Electric are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changshu Ruite may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Xingyuan Environment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xingyuan Environment Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Changshu Ruite and Xingyuan Environment

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

The idea behind Changshu Ruite Electric and Xingyuan 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.