Correlation Between Wuhan Xianglong and Empyrean Technology

Can any of the company-specific risk be diversified away by investing in both Wuhan Xianglong and Empyrean Technology 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 Wuhan Xianglong and Empyrean Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wuhan Xianglong Power and Empyrean Technology Co, you can compare the effects of market volatilities on Wuhan Xianglong and Empyrean Technology 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 Wuhan Xianglong with a short position of Empyrean Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wuhan Xianglong and Empyrean Technology.

Diversification Opportunities for Wuhan Xianglong and Empyrean Technology

0.57

Correlation Coefficient

Wuhan Xianglong  Empyrean Technology

Very weak diversification

The 3 months correlation between Wuhan and Empyrean is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Wuhan Xianglong Power and Empyrean Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empyrean Technology and Wuhan Xianglong 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 Wuhan Xianglong Power are associated (or correlated) with Empyrean Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empyrean Technology has no effect on the direction of Wuhan Xianglong i.e., Wuhan Xianglong and Empyrean Technology go up and down completely randomly.

Pair Corralation between Wuhan Xianglong and Empyrean Technology

Assuming the 90 days trading horizon Wuhan Xianglong Power is expected to generate 1.06 times more return on investment than Empyrean Technology. However, Wuhan Xianglong is 1.06 times more volatile than Empyrean Technology Co. It trades about 0.03 of its potential returns per unit of risk. Empyrean Technology Co is currently generating about 0.02 per unit of risk. If you would invest  802.00  in Wuhan Xianglong Power on December 7, 2024 and sell it today you would earn a total of  204.00  from holding Wuhan Xianglong Power or generate 25.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Wuhan Xianglong Power  vs.  Empyrean Technology Co

Wuhan Xianglong Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wuhan Xianglong Power 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.

Empyrean Technology

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Wuhan Xianglong and Empyrean Technology

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

The idea behind Wuhan Xianglong Power and Empyrean Technology 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.