Correlation Between Industrial and Changshu Ruite

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

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

Diversification Opportunities for Industrial and Changshu Ruite

-0.09

Correlation Coefficient

Industrial  Changshu Ruite

Good diversification

The 3 months correlation between Industrial and Changshu is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial 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 Industrial 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 Industrial and Commercial 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 Industrial i.e., Industrial and Changshu Ruite go up and down completely randomly.

Pair Corralation between Industrial and Changshu Ruite

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.61 times more return on investment than Changshu Ruite. However, Industrial and Commercial is 1.65 times less risky than Changshu Ruite. It trades about 0.14 of its potential returns per unit of risk. Changshu Ruite Electric is currently generating about 0.02 per unit of risk. If you would invest  621.00  in Industrial and Commercial on December 3, 2024 and sell it today you would earn a total of  64.00  from holding Industrial and Commercial or generate 10.31% return on investment over 90 days.

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

Industrial and Commercial  vs.  Changshu Ruite Electric

Industrial and Commercial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Changshu Ruite Electric

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Changshu Ruite Electric are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Industrial and Changshu Ruite

The main advantage of trading using opposite Industrial and Changshu Ruite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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 Industrial and Commercial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.