Correlation Between State Grid and Changshu Ruite

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

By analyzing existing cross correlation between State Grid InformationCommunication and Changshu Ruite Electric, you can compare the effects of market volatilities on State Grid and Changshu Ruite 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 State Grid with a short position of Changshu Ruite. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Grid and Changshu Ruite.

Diversification Opportunities for State Grid and Changshu Ruite

0.49

Correlation Coefficient

State Grid  Changshu Ruite

Very weak diversification

The 3 months correlation between State and Changshu is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding State Grid InformationCommunic and Changshu Ruite Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changshu Ruite Electric and State Grid 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 State Grid InformationCommunication are associated (or correlated) with Changshu Ruite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changshu Ruite Electric has no effect on the direction of State Grid i.e., State Grid and Changshu Ruite go up and down completely randomly.

Pair Corralation between State Grid and Changshu Ruite

Assuming the 90 days trading horizon State Grid InformationCommunication is expected to under-perform the Changshu Ruite. But the stock apears to be less risky and, when comparing its historical volatility, State Grid InformationCommunication is 1.07 times less risky than Changshu Ruite. The stock trades about -0.35 of its potential returns per unit of risk. The Changshu Ruite Electric is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  791.00  in Changshu Ruite Electric on October 9, 2024 and sell it today you would lose (101.00) from holding Changshu Ruite Electric or give up 12.77% of portfolio value over 90 days.

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

State Grid InformationCommunic  vs.  Changshu Ruite Electric

State Grid Informati

Risk-Adjusted Performance

0 of 100

Very Weak

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

Changshu Ruite Electric

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with State Grid and Changshu Ruite

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

The idea behind State Grid InformationCommunication and Changshu Ruite Electric 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.