Correlation Between Chongqing Road and Lander Sports

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

By analyzing existing cross correlation between Chongqing Road Bridge and Lander Sports Development, you can compare the effects of market volatilities on Chongqing Road and Lander Sports 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 Chongqing Road with a short position of Lander Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Road and Lander Sports.

Diversification Opportunities for Chongqing Road and Lander Sports

0.3

Correlation Coefficient

Chongqing Road  Lander Sports

Weak diversification

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

Pair Corralation between Chongqing Road and Lander Sports

Assuming the 90 days trading horizon Chongqing Road Bridge is expected to under-perform the Lander Sports. But the stock apears to be less risky and, when comparing its historical volatility, Chongqing Road Bridge is 2.12 times less risky than Lander Sports. The stock trades about -0.44 of its potential returns per unit of risk. The Lander Sports Development is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  333.00  in Lander Sports Development on October 9, 2024 and sell it today you would lose (6.00) from holding Lander Sports Development or give up 1.8% of portfolio value over 90 days.

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

Chongqing Road Bridge  vs.  Lander Sports Development

Chongqing Road Bridge

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Road Bridge are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chongqing Road may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lander Sports Development

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lander Sports Development are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lander Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chongqing Road and Lander Sports

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

The idea behind Chongqing Road Bridge and Lander Sports Development 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.