Correlation Between Fuzhou Rockchip and Jiangsu Cai

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

By analyzing existing cross correlation between Fuzhou Rockchip Electronics and Jiangsu Cai Qin, you can compare the effects of market volatilities on Fuzhou Rockchip and Jiangsu Cai 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 Fuzhou Rockchip with a short position of Jiangsu Cai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuzhou Rockchip and Jiangsu Cai.

Diversification Opportunities for Fuzhou Rockchip and Jiangsu Cai

0.09

Correlation Coefficient

Fuzhou Rockchip  Jiangsu Cai

Significant diversification

The 3 months correlation between Fuzhou and Jiangsu is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Fuzhou Rockchip Electronics and Jiangsu Cai Qin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Cai Qin and Fuzhou Rockchip 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 Fuzhou Rockchip Electronics are associated (or correlated) with Jiangsu Cai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Cai Qin has no effect on the direction of Fuzhou Rockchip i.e., Fuzhou Rockchip and Jiangsu Cai go up and down completely randomly.

Pair Corralation between Fuzhou Rockchip and Jiangsu Cai

Assuming the 90 days trading horizon Fuzhou Rockchip is expected to generate 1.14 times less return on investment than Jiangsu Cai. But when comparing it to its historical volatility, Fuzhou Rockchip Electronics is 1.03 times less risky than Jiangsu Cai. It trades about 0.15 of its potential returns per unit of risk. Jiangsu Cai Qin is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,869  in Jiangsu Cai Qin on December 26, 2024 and sell it today you would earn a total of  871.00  from holding Jiangsu Cai Qin or generate 46.6% return on investment over 90 days.

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

Fuzhou Rockchip Electronics  vs.  Jiangsu Cai Qin

Fuzhou Rockchip Elec

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fuzhou Rockchip Electronics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fuzhou Rockchip sustained solid returns over the last few months and may actually be approaching a breakup point.

Jiangsu Cai Qin

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Cai Qin are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Cai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fuzhou Rockchip and Jiangsu Cai

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

The idea behind Fuzhou Rockchip Electronics and Jiangsu Cai Qin 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.