Correlation Between Hangzhou Arcvideo and Changzhou Evergreen

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

By analyzing existing cross correlation between Hangzhou Arcvideo Technology and Changzhou Evergreen Technology, you can compare the effects of market volatilities on Hangzhou Arcvideo and Changzhou Evergreen 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 Hangzhou Arcvideo with a short position of Changzhou Evergreen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hangzhou Arcvideo and Changzhou Evergreen.

Diversification Opportunities for Hangzhou Arcvideo and Changzhou Evergreen

0.74

Correlation Coefficient

Hangzhou Arcvideo  Changzhou Evergreen

Poor diversification

The 3 months correlation between Hangzhou and Changzhou is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hangzhou Arcvideo Technology and Changzhou Evergreen Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changzhou Evergreen and Hangzhou Arcvideo 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 Hangzhou Arcvideo Technology are associated (or correlated) with Changzhou Evergreen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changzhou Evergreen has no effect on the direction of Hangzhou Arcvideo i.e., Hangzhou Arcvideo and Changzhou Evergreen go up and down completely randomly.

Pair Corralation between Hangzhou Arcvideo and Changzhou Evergreen

Assuming the 90 days trading horizon Hangzhou Arcvideo Technology is expected to under-perform the Changzhou Evergreen. In addition to that, Hangzhou Arcvideo is 1.36 times more volatile than Changzhou Evergreen Technology. It trades about -0.01 of its total potential returns per unit of risk. Changzhou Evergreen Technology is currently generating about 0.0 per unit of volatility. If you would invest  1,680  in Changzhou Evergreen Technology on October 10, 2024 and sell it today you would lose (41.00) from holding Changzhou Evergreen Technology or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Hangzhou Arcvideo Technology  vs.  Changzhou Evergreen Technology

Hangzhou Arcvideo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hangzhou Arcvideo Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hangzhou Arcvideo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Changzhou Evergreen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changzhou Evergreen Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Changzhou Evergreen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hangzhou Arcvideo and Changzhou Evergreen

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

The idea behind Hangzhou Arcvideo Technology and Changzhou Evergreen Technology 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.