Correlation Between Orient Sec and Caihong Display

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

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

Diversification Opportunities for Orient Sec and Caihong Display

0.2

Correlation Coefficient

Orient Sec  Caihong Display

Modest diversification

The 3 months correlation between Orient and Caihong is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Orient Sec Co and Caihong Display Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caihong Display Devices and Orient Sec 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 Orient Sec Co are associated (or correlated) with Caihong Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caihong Display Devices has no effect on the direction of Orient Sec i.e., Orient Sec and Caihong Display go up and down completely randomly.

Pair Corralation between Orient Sec and Caihong Display

Assuming the 90 days trading horizon Orient Sec is expected to generate 1.46 times less return on investment than Caihong Display. But when comparing it to its historical volatility, Orient Sec Co is 1.45 times less risky than Caihong Display. It trades about 0.04 of its potential returns per unit of risk. Caihong Display Devices is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  656.00  in Caihong Display Devices on October 9, 2024 and sell it today you would earn a total of  156.00  from holding Caihong Display Devices or generate 23.78% return on investment over 90 days.

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

Orient Sec Co  vs.  Caihong Display Devices

Orient Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orient Sec Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Caihong Display Devices

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caihong Display Devices are ranked lower than 4 (%) 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 February 2025.

Pair Trading with Orient Sec and Caihong Display

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

The idea behind Orient Sec Co and Caihong Display Devices 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.