Correlation Between Changsha DIALINE and Risuntek Inc

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

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

Diversification Opportunities for Changsha DIALINE and Risuntek Inc

0.63

Correlation Coefficient

Changsha DIALINE  Risuntek Inc

Poor diversification

The 3 months correlation between Changsha and Risuntek Inc is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Changsha DIALINE New and Risuntek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Risuntek Inc and Changsha DIALINE 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 Changsha DIALINE New are associated (or correlated) with Risuntek Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Risuntek Inc has no effect on the direction of Changsha DIALINE i.e., Changsha DIALINE and Risuntek Inc go up and down completely randomly.

Pair Corralation between Changsha DIALINE and Risuntek Inc

Assuming the 90 days trading horizon Changsha DIALINE New is expected to generate 1.05 times more return on investment than Risuntek Inc. However, Changsha DIALINE is 1.05 times more volatile than Risuntek. It trades about -0.01 of its potential returns per unit of risk. Risuntek is currently generating about -0.07 per unit of risk. If you would invest  860.00  in Changsha DIALINE New on December 1, 2024 and sell it today you would lose (36.00) from holding Changsha DIALINE New or give up 4.19% of portfolio value over 90 days.

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

Changsha DIALINE New  vs.  Risuntek

Changsha DIALINE New

Risk-Adjusted Performance

Very Weak

Over the last 90 days Changsha DIALINE New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Changsha DIALINE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Risuntek Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Risuntek has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Changsha DIALINE and Risuntek Inc

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

The idea behind Changsha DIALINE New and Risuntek 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.