Correlation Between Piotech and China National

Can any of the company-specific risk be diversified away by investing in both Piotech and China National 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 China National 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 China National Software, you can compare the effects of market volatilities on Piotech and China National 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 China National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Piotech and China National.

Diversification Opportunities for Piotech and China National

0.46

Correlation Coefficient

Piotech  China National

Very weak diversification

The 3 months correlation between Piotech and China is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Piotech Inc A and China National Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China National Software 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 China National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China National Software has no effect on the direction of Piotech i.e., Piotech and China National go up and down completely randomly.

Pair Corralation between Piotech and China National

Assuming the 90 days trading horizon Piotech Inc A is expected to generate 1.09 times more return on investment than China National. However, Piotech is 1.09 times more volatile than China National Software. It trades about 0.05 of its potential returns per unit of risk. China National Software is currently generating about -0.05 per unit of risk. If you would invest  16,377  in Piotech Inc A on December 25, 2024 and sell it today you would earn a total of  955.00  from holding Piotech Inc A or generate 5.83% return on investment over 90 days.

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

Piotech Inc A  vs.  China National Software

Piotech Inc A

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Piotech Inc A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Piotech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

China National Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days China National Software 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 China National

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

The idea behind Piotech Inc A and China National Software 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.