Correlation Between Vats Liquor and Cambricon Technologies

Can any of the company-specific risk be diversified away by investing in both Vats Liquor and Cambricon Technologies 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 Vats Liquor and Cambricon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vats Liquor Chain and Cambricon Technologies Corp, you can compare the effects of market volatilities on Vats Liquor and Cambricon Technologies 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 Vats Liquor with a short position of Cambricon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vats Liquor and Cambricon Technologies.

Diversification Opportunities for Vats Liquor and Cambricon Technologies

0.41

Correlation Coefficient

Vats Liquor  Cambricon Technologies

Very weak diversification

The 3 months correlation between Vats and Cambricon is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Vats Liquor Chain and Cambricon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambricon Technologies and Vats Liquor 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 Vats Liquor Chain are associated (or correlated) with Cambricon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambricon Technologies has no effect on the direction of Vats Liquor i.e., Vats Liquor and Cambricon Technologies go up and down completely randomly.

Pair Corralation between Vats Liquor and Cambricon Technologies

Assuming the 90 days trading horizon Vats Liquor is expected to generate 115.03 times less return on investment than Cambricon Technologies. But when comparing it to its historical volatility, Vats Liquor Chain is 1.49 times less risky than Cambricon Technologies. It trades about 0.0 of its potential returns per unit of risk. Cambricon Technologies Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  12,700  in Cambricon Technologies Corp on October 5, 2024 and sell it today you would earn a total of  51,862  from holding Cambricon Technologies Corp or generate 408.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.67%
Values	Daily Returns

Vats Liquor Chain  vs.  Cambricon Technologies Corp

Vats Liquor Chain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vats Liquor Chain 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.

Cambricon Technologies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cambricon Technologies Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cambricon Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vats Liquor and Cambricon Technologies

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

The idea behind Vats Liquor Chain and Cambricon Technologies Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.