Correlation Between Rongcheer Industrial and Wasu Media

Can any of the company-specific risk be diversified away by investing in both Rongcheer Industrial and Wasu Media 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 Rongcheer Industrial and Wasu Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rongcheer Industrial Technology and Wasu Media Holding, you can compare the effects of market volatilities on Rongcheer Industrial and Wasu Media 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 Rongcheer Industrial with a short position of Wasu Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rongcheer Industrial and Wasu Media.

Diversification Opportunities for Rongcheer Industrial and Wasu Media

0.93

Correlation Coefficient

Rongcheer Industrial  Wasu Media

Almost no diversification

The 3 months correlation between Rongcheer and Wasu is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Rongcheer Industrial Technolog and Wasu Media Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasu Media Holding and Rongcheer Industrial 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 Rongcheer Industrial Technology are associated (or correlated) with Wasu Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasu Media Holding has no effect on the direction of Rongcheer Industrial i.e., Rongcheer Industrial and Wasu Media go up and down completely randomly.

Pair Corralation between Rongcheer Industrial and Wasu Media

Assuming the 90 days trading horizon Rongcheer Industrial Technology is expected to generate 1.69 times more return on investment than Wasu Media. However, Rongcheer Industrial is 1.69 times more volatile than Wasu Media Holding. It trades about 0.13 of its potential returns per unit of risk. Wasu Media Holding is currently generating about 0.2 per unit of risk. If you would invest  4,313  in Rongcheer Industrial Technology on September 18, 2024 and sell it today you would earn a total of  1,592  from holding Rongcheer Industrial Technology or generate 36.91% return on investment over 90 days.

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

Rongcheer Industrial Technolog  vs.  Wasu Media Holding

Rongcheer Industrial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rongcheer Industrial Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rongcheer Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Wasu Media Holding

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wasu Media Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wasu Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rongcheer Industrial and Wasu Media

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

The idea behind Rongcheer Industrial Technology and Wasu Media Holding 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.