Correlation Between Inner Mongolia and Shaanxi Lighte

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

By analyzing existing cross correlation between Inner Mongolia BaoTou and Shaanxi Lighte Optoelectronics, you can compare the effects of market volatilities on Inner Mongolia and Shaanxi Lighte 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 Inner Mongolia with a short position of Shaanxi Lighte. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inner Mongolia and Shaanxi Lighte.

Diversification Opportunities for Inner Mongolia and Shaanxi Lighte

0.58

Correlation Coefficient

Inner Mongolia  Shaanxi Lighte

Very weak diversification

The 3 months correlation between Inner and Shaanxi is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Inner Mongolia BaoTou and Shaanxi Lighte Optoelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Lighte Optoe and Inner Mongolia 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 Inner Mongolia BaoTou are associated (or correlated) with Shaanxi Lighte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Lighte Optoe has no effect on the direction of Inner Mongolia i.e., Inner Mongolia and Shaanxi Lighte go up and down completely randomly.

Pair Corralation between Inner Mongolia and Shaanxi Lighte

Assuming the 90 days trading horizon Inner Mongolia BaoTou is expected to generate 0.89 times more return on investment than Shaanxi Lighte. However, Inner Mongolia BaoTou is 1.12 times less risky than Shaanxi Lighte. It trades about 0.04 of its potential returns per unit of risk. Shaanxi Lighte Optoelectronics is currently generating about 0.02 per unit of risk. If you would invest  168.00  in Inner Mongolia BaoTou on October 25, 2024 and sell it today you would earn a total of  9.00  from holding Inner Mongolia BaoTou or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Inner Mongolia BaoTou  vs.  Shaanxi Lighte Optoelectronics

Inner Mongolia BaoTou

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inner Mongolia BaoTou are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inner Mongolia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Shaanxi Lighte Optoe

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Lighte Optoelectronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shaanxi Lighte is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Inner Mongolia and Shaanxi Lighte

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

The idea behind Inner Mongolia BaoTou and Shaanxi Lighte Optoelectronics 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.