Correlation Between Montage Technology and Keda Clean

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

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

Diversification Opportunities for Montage Technology and Keda Clean

0.59

Correlation Coefficient

Montage Technology  Keda Clean

Very weak diversification

The 3 months correlation between Montage and Keda is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Montage Technology Co and Keda Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keda Clean Energy and Montage Technology 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 Montage Technology Co are associated (or correlated) with Keda Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keda Clean Energy has no effect on the direction of Montage Technology i.e., Montage Technology and Keda Clean go up and down completely randomly.

Pair Corralation between Montage Technology and Keda Clean

Assuming the 90 days trading horizon Montage Technology Co is expected to generate 1.6 times more return on investment than Keda Clean. However, Montage Technology is 1.6 times more volatile than Keda Clean Energy. It trades about 0.08 of its potential returns per unit of risk. Keda Clean Energy is currently generating about 0.0 per unit of risk. If you would invest  5,648  in Montage Technology Co on September 29, 2024 and sell it today you would earn a total of  1,900  from holding Montage Technology Co or generate 33.64% return on investment over 90 days.

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

Montage Technology Co  vs.  Keda Clean Energy

Montage Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Montage Technology Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Montage Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Keda Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keda Clean Energy 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.

Pair Trading with Montage Technology and Keda Clean

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

The idea behind Montage Technology Co and Keda Clean Energy 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.