Correlation Between China Sports and Invengo Information

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

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

Diversification Opportunities for China Sports and Invengo Information

0.71

Correlation Coefficient

China Sports  Invengo Information

Poor diversification

The 3 months correlation between China and Invengo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding China Sports Industry and Invengo Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invengo Information and China Sports 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 China Sports Industry are associated (or correlated) with Invengo Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invengo Information has no effect on the direction of China Sports i.e., China Sports and Invengo Information go up and down completely randomly.

Pair Corralation between China Sports and Invengo Information

Assuming the 90 days trading horizon China Sports is expected to generate 8.11 times less return on investment than Invengo Information. But when comparing it to its historical volatility, China Sports Industry is 1.76 times less risky than Invengo Information. It trades about 0.02 of its potential returns per unit of risk. Invengo Information Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  487.00  in Invengo Information Technology on October 23, 2024 and sell it today you would earn a total of  76.00  from holding Invengo Information Technology or generate 15.61% return on investment over 90 days.

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

China Sports Industry  vs.  Invengo Information Technology

China Sports Industry

Risk-Adjusted Performance

1 of 100

Weak

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

Invengo Information

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invengo Information Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Invengo Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Sports and Invengo Information

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

The idea behind China Sports Industry and Invengo Information Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.