Correlation Between Caihong Display and Shanghai Yaoji

Can any of the company-specific risk be diversified away by investing in both Caihong Display and Shanghai Yaoji 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 Caihong Display and Shanghai Yaoji into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caihong Display Devices and Shanghai Yaoji Playing, you can compare the effects of market volatilities on Caihong Display and Shanghai Yaoji 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 Caihong Display with a short position of Shanghai Yaoji. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caihong Display and Shanghai Yaoji.

Diversification Opportunities for Caihong Display and Shanghai Yaoji

-0.4

Correlation Coefficient

Caihong Display  Shanghai Yaoji

Very good diversification

The 3 months correlation between Caihong and Shanghai is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Caihong Display Devices and Shanghai Yaoji Playing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Yaoji Playing and Caihong Display 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 Caihong Display Devices are associated (or correlated) with Shanghai Yaoji. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Yaoji Playing has no effect on the direction of Caihong Display i.e., Caihong Display and Shanghai Yaoji go up and down completely randomly.

Pair Corralation between Caihong Display and Shanghai Yaoji

Assuming the 90 days trading horizon Caihong Display Devices is expected to generate 0.72 times more return on investment than Shanghai Yaoji. However, Caihong Display Devices is 1.38 times less risky than Shanghai Yaoji. It trades about 0.05 of its potential returns per unit of risk. Shanghai Yaoji Playing is currently generating about -0.07 per unit of risk. If you would invest  714.00  in Caihong Display Devices on December 2, 2024 and sell it today you would earn a total of  41.00  from holding Caihong Display Devices or generate 5.74% return on investment over 90 days.

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

Caihong Display Devices  vs.  Shanghai Yaoji Playing

Caihong Display Devices

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caihong Display Devices are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Caihong Display may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shanghai Yaoji Playing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Yaoji Playing 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.

Pair Trading with Caihong Display and Shanghai Yaoji

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

The idea behind Caihong Display Devices and Shanghai Yaoji Playing 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.