Correlation Between 360 Security and Chengdu Kanghua

Can any of the company-specific risk be diversified away by investing in both 360 Security and Chengdu Kanghua 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 360 Security and Chengdu Kanghua into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 360 Security Technology and Chengdu Kanghua Biological, you can compare the effects of market volatilities on 360 Security and Chengdu Kanghua 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 360 Security with a short position of Chengdu Kanghua. Check out your portfolio center. Please also check ongoing floating volatility patterns of 360 Security and Chengdu Kanghua.

Diversification Opportunities for 360 Security and Chengdu Kanghua

-0.22

Correlation Coefficient

360 Security  Chengdu Kanghua

Very good diversification

The 3 months correlation between 360 and Chengdu is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding 360 Security Technology and Chengdu Kanghua Biological in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu Kanghua Biol and 360 Security 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 360 Security Technology are associated (or correlated) with Chengdu Kanghua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu Kanghua Biol has no effect on the direction of 360 Security i.e., 360 Security and Chengdu Kanghua go up and down completely randomly.

Pair Corralation between 360 Security and Chengdu Kanghua

Assuming the 90 days trading horizon 360 Security Technology is expected to generate 1.28 times more return on investment than Chengdu Kanghua. However, 360 Security is 1.28 times more volatile than Chengdu Kanghua Biological. It trades about 0.04 of its potential returns per unit of risk. Chengdu Kanghua Biological is currently generating about -0.02 per unit of risk. If you would invest  672.00  in 360 Security Technology on October 4, 2024 and sell it today you would earn a total of  363.00  from holding 360 Security Technology or generate 54.02% return on investment over 90 days.

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

360 Security Technology  vs.  Chengdu Kanghua Biological

360 Security Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 360 Security Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 360 Security sustained solid returns over the last few months and may actually be approaching a breakup point.

Chengdu Kanghua Biol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chengdu Kanghua Biological 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with 360 Security and Chengdu Kanghua

The main advantage of trading using opposite 360 Security and Chengdu Kanghua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 360 Security position performs unexpectedly, Chengdu Kanghua 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 Chengdu Kanghua will offset losses from the drop in Chengdu Kanghua's long position.

The idea behind 360 Security Technology and Chengdu Kanghua Biological 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.