Correlation Between Arcadyan Technology and Shenmao Technology

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

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

Diversification Opportunities for Arcadyan Technology and Shenmao Technology

0.3

Correlation Coefficient

Arcadyan Technology  Shenmao Technology

Weak diversification

The 3 months correlation between Arcadyan and Shenmao is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Arcadyan Technology Corp and Shenmao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenmao Technology and Arcadyan Technology 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 Arcadyan Technology Corp are associated (or correlated) with Shenmao Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenmao Technology has no effect on the direction of Arcadyan Technology i.e., Arcadyan Technology and Shenmao Technology go up and down completely randomly.

Pair Corralation between Arcadyan Technology and Shenmao Technology

Assuming the 90 days trading horizon Arcadyan Technology Corp is expected to generate 1.36 times more return on investment than Shenmao Technology. However, Arcadyan Technology is 1.36 times more volatile than Shenmao Technology. It trades about 0.18 of its potential returns per unit of risk. Shenmao Technology is currently generating about 0.02 per unit of risk. If you would invest  17,700  in Arcadyan Technology Corp on December 23, 2024 and sell it today you would earn a total of  4,450  from holding Arcadyan Technology Corp or generate 25.14% return on investment over 90 days.

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

Arcadyan Technology Corp  vs.  Shenmao Technology

Arcadyan Technology Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arcadyan Technology Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arcadyan Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Shenmao Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenmao Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Shenmao Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Arcadyan Technology and Shenmao Technology

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

The idea behind Arcadyan Technology Corp and Shenmao Technology 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.

Check out your portfolio center.

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.