Correlation Between Chongqing Road and RoadMain T

Can any of the company-specific risk be diversified away by investing in both Chongqing Road and RoadMain T 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 RoadMain T 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 RoadMain T Co, you can compare the effects of market volatilities on Chongqing Road and RoadMain T 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 RoadMain T. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Road and RoadMain T.

Diversification Opportunities for Chongqing Road and RoadMain T

0.84

Correlation Coefficient

Chongqing Road  RoadMain T

Very poor diversification

The 3 months correlation between Chongqing and RoadMain is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Road Bridge and RoadMain T Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RoadMain T 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 RoadMain T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RoadMain T has no effect on the direction of Chongqing Road i.e., Chongqing Road and RoadMain T go up and down completely randomly.

Pair Corralation between Chongqing Road and RoadMain T

Assuming the 90 days trading horizon Chongqing Road Bridge is expected to under-perform the RoadMain T. In addition to that, Chongqing Road is 1.31 times more volatile than RoadMain T Co. It trades about -0.07 of its total potential returns per unit of risk. RoadMain T Co is currently generating about -0.04 per unit of volatility. If you would invest  3,127  in RoadMain T Co on December 4, 2024 and sell it today you would lose (211.00) from holding RoadMain T Co or give up 6.75% of portfolio value over 90 days.

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

Chongqing Road Bridge  vs.  RoadMain T Co

Chongqing Road Bridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chongqing Road Bridge has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

RoadMain T

Risk-Adjusted Performance

Very Weak

Over the last 90 days RoadMain T Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RoadMain T is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chongqing Road and RoadMain T

The main advantage of trading using opposite Chongqing Road and RoadMain T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Road position performs unexpectedly, RoadMain T 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 RoadMain T will offset losses from the drop in RoadMain T's long position.

The idea behind Chongqing Road Bridge and RoadMain T Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.