Correlation Between Contemporary Amperex and Longshine Technology

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

By analyzing existing cross correlation between Contemporary Amperex Technology and Longshine Technology Co, you can compare the effects of market volatilities on Contemporary Amperex and Longshine 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 Contemporary Amperex with a short position of Longshine Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Contemporary Amperex and Longshine Technology.

Diversification Opportunities for Contemporary Amperex and Longshine Technology

0.81

Correlation Coefficient

Contemporary Amperex  Longshine Technology

Very poor diversification

The 3 months correlation between Contemporary and Longshine is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Contemporary Amperex Technolog and Longshine Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longshine Technology and Contemporary Amperex 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 Contemporary Amperex Technology are associated (or correlated) with Longshine Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longshine Technology has no effect on the direction of Contemporary Amperex i.e., Contemporary Amperex and Longshine Technology go up and down completely randomly.

Pair Corralation between Contemporary Amperex and Longshine Technology

Assuming the 90 days trading horizon Contemporary Amperex Technology is expected to generate 0.54 times more return on investment than Longshine Technology. However, Contemporary Amperex Technology is 1.86 times less risky than Longshine Technology. It trades about 0.0 of its potential returns per unit of risk. Longshine Technology Co is currently generating about -0.02 per unit of risk. If you would invest  25,336  in Contemporary Amperex Technology on October 20, 2024 and sell it today you would lose (186.00) from holding Contemporary Amperex Technology or give up 0.73% of portfolio value over 90 days.

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

Contemporary Amperex Technolog  vs.  Longshine Technology Co

Contemporary Amperex

Risk-Adjusted Performance

0 of 100

Very Weak

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

Longshine Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Contemporary Amperex and Longshine Technology

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

The idea behind Contemporary Amperex Technology and Longshine Technology Co 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.