Correlation Between Roo Hsing and Information Technology

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

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

Diversification Opportunities for Roo Hsing and Information Technology

-0.16

Correlation Coefficient

Roo Hsing  Information Technology

Good diversification

The 3 months correlation between Roo and Information is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Roo Hsing Co and Information Technology Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Technology and Roo Hsing 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 Roo Hsing Co are associated (or correlated) with Information Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Technology has no effect on the direction of Roo Hsing i.e., Roo Hsing and Information Technology go up and down completely randomly.

Pair Corralation between Roo Hsing and Information Technology

Assuming the 90 days trading horizon Roo Hsing Co is expected to generate 0.6 times more return on investment than Information Technology. However, Roo Hsing Co is 1.67 times less risky than Information Technology. It trades about 0.05 of its potential returns per unit of risk. Information Technology Total is currently generating about -0.02 per unit of risk. If you would invest  313.00  in Roo Hsing Co on September 20, 2024 and sell it today you would earn a total of  4.00  from holding Roo Hsing Co or generate 1.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Roo Hsing Co  vs.  Information Technology Total

Roo Hsing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roo Hsing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Roo Hsing is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Information Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Information Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Roo Hsing and Information Technology

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

The idea behind Roo Hsing Co and Information Technology Total 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.