Correlation Between Zhuhai Comleader and ChengDu Hi

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

By analyzing existing cross correlation between Zhuhai Comleader Information and ChengDu Hi Tech Development, you can compare the effects of market volatilities on Zhuhai Comleader and ChengDu Hi 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 Zhuhai Comleader with a short position of ChengDu Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhuhai Comleader and ChengDu Hi.

Diversification Opportunities for Zhuhai Comleader and ChengDu Hi

0.65

Correlation Coefficient

Zhuhai Comleader  ChengDu Hi

Poor diversification

The 3 months correlation between Zhuhai and ChengDu is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Zhuhai Comleader Information and ChengDu Hi Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChengDu Hi Tech and Zhuhai Comleader 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 Zhuhai Comleader Information are associated (or correlated) with ChengDu Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChengDu Hi Tech has no effect on the direction of Zhuhai Comleader i.e., Zhuhai Comleader and ChengDu Hi go up and down completely randomly.

Pair Corralation between Zhuhai Comleader and ChengDu Hi

Assuming the 90 days trading horizon Zhuhai Comleader is expected to generate 1.17 times less return on investment than ChengDu Hi. In addition to that, Zhuhai Comleader is 1.04 times more volatile than ChengDu Hi Tech Development. It trades about 0.09 of its total potential returns per unit of risk. ChengDu Hi Tech Development is currently generating about 0.12 per unit of volatility. If you would invest  4,948  in ChengDu Hi Tech Development on September 29, 2024 and sell it today you would earn a total of  1,417  from holding ChengDu Hi Tech Development or generate 28.64% return on investment over 90 days.

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

Zhuhai Comleader Information  vs.  ChengDu Hi Tech Development

Zhuhai Comleader Inf

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhuhai Comleader Information are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhuhai Comleader sustained solid returns over the last few months and may actually be approaching a breakup point.

ChengDu Hi Tech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChengDu Hi Tech Development are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ChengDu Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhuhai Comleader and ChengDu Hi

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

The idea behind Zhuhai Comleader Information and ChengDu Hi Tech Development 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.