Correlation Between Keda Clean and Changshu Ruite

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

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

Diversification Opportunities for Keda Clean and Changshu Ruite

0.21

Correlation Coefficient

Keda Clean  Changshu Ruite

Modest diversification

The 3 months correlation between Keda and Changshu is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Keda Clean Energy 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 Keda Clean 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 Keda Clean Energy 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 Keda Clean i.e., Keda Clean and Changshu Ruite go up and down completely randomly.

Pair Corralation between Keda Clean and Changshu Ruite

Assuming the 90 days trading horizon Keda Clean Energy is expected to under-perform the Changshu Ruite. But the stock apears to be less risky and, when comparing its historical volatility, Keda Clean Energy is 1.77 times less risky than Changshu Ruite. The stock trades about -0.05 of its potential returns per unit of risk. The Changshu Ruite Electric is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  823.00  in Changshu Ruite Electric on October 24, 2024 and sell it today you would lose (153.00) from holding Changshu Ruite Electric or give up 18.59% of portfolio value over 90 days.

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

Keda Clean Energy  vs.  Changshu Ruite Electric

Keda Clean Energy

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keda Clean Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Keda Clean may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Changshu Ruite Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changshu Ruite Electric has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Keda Clean and Changshu Ruite

The main advantage of trading using opposite Keda Clean and Changshu Ruite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keda Clean 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 Keda Clean Energy 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.