Correlation Between Contemporary Amperex and Shandong Homey

Can any of the company-specific risk be diversified away by investing in both Contemporary Amperex and Shandong Homey 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 Shandong Homey 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 Shandong Homey Aquatic, you can compare the effects of market volatilities on Contemporary Amperex and Shandong Homey 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 Shandong Homey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Contemporary Amperex and Shandong Homey.

Diversification Opportunities for Contemporary Amperex and Shandong Homey

0.39

Correlation Coefficient

Contemporary Amperex  Shandong Homey

Weak diversification

The 3 months correlation between Contemporary and Shandong is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Contemporary Amperex Technolog and Shandong Homey Aquatic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Homey Aquatic 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 Shandong Homey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Homey Aquatic has no effect on the direction of Contemporary Amperex i.e., Contemporary Amperex and Shandong Homey go up and down completely randomly.

Pair Corralation between Contemporary Amperex and Shandong Homey

Assuming the 90 days trading horizon Contemporary Amperex Technology is expected to generate 0.59 times more return on investment than Shandong Homey. However, Contemporary Amperex Technology is 1.69 times less risky than Shandong Homey. It trades about 0.06 of its potential returns per unit of risk. Shandong Homey Aquatic is currently generating about -0.03 per unit of risk. If you would invest  25,348  in Contemporary Amperex Technology on November 28, 2024 and sell it today you would earn a total of  1,514  from holding Contemporary Amperex Technology or generate 5.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Contemporary Amperex Technolog  vs.  Shandong Homey Aquatic

Contemporary Amperex

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Contemporary Amperex Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Contemporary Amperex may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Shandong Homey Aquatic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shandong Homey Aquatic 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 Contemporary Amperex and Shandong Homey

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

The idea behind Contemporary Amperex Technology and Shandong Homey Aquatic 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.