Correlation Between Piotech and Changchun

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

By analyzing existing cross correlation between Piotech Inc A and Changchun UP Optotech, you can compare the effects of market volatilities on Piotech and Changchun 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 Piotech with a short position of Changchun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Piotech and Changchun.

Diversification Opportunities for Piotech and Changchun

0.85

Correlation Coefficient

Piotech  Changchun

Very poor diversification

The 3 months correlation between Piotech and Changchun is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Piotech Inc A and Changchun UP Optotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changchun UP Optotech and Piotech 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 Piotech Inc A are associated (or correlated) with Changchun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changchun UP Optotech has no effect on the direction of Piotech i.e., Piotech and Changchun go up and down completely randomly.

Pair Corralation between Piotech and Changchun

Assuming the 90 days trading horizon Piotech Inc A is expected to generate 1.06 times more return on investment than Changchun. However, Piotech is 1.06 times more volatile than Changchun UP Optotech. It trades about -0.03 of its potential returns per unit of risk. Changchun UP Optotech is currently generating about -0.08 per unit of risk. If you would invest  18,710  in Piotech Inc A on December 4, 2024 and sell it today you would lose (1,196) from holding Piotech Inc A or give up 6.39% of portfolio value over 90 days.

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

Piotech Inc A  vs.  Changchun UP Optotech

Piotech Inc A

Risk-Adjusted Performance

Very Weak

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

Changchun UP Optotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Changchun UP Optotech 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 Piotech and Changchun

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

The idea behind Piotech Inc A and Changchun UP Optotech 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.