Correlation Between Shanghai Rendu and Northking Information

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

By analyzing existing cross correlation between Shanghai Rendu Biotechnology and Northking Information Technology, you can compare the effects of market volatilities on Shanghai Rendu and Northking Information 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 Shanghai Rendu with a short position of Northking Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Rendu and Northking Information.

Diversification Opportunities for Shanghai Rendu and Northking Information

0.62

Correlation Coefficient

Shanghai Rendu  Northking Information

Poor diversification

The 3 months correlation between Shanghai and Northking is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Rendu Biotechnology and Northking Information Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northking Information and Shanghai Rendu 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 Shanghai Rendu Biotechnology are associated (or correlated) with Northking Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northking Information has no effect on the direction of Shanghai Rendu i.e., Shanghai Rendu and Northking Information go up and down completely randomly.

Pair Corralation between Shanghai Rendu and Northking Information

Assuming the 90 days trading horizon Shanghai Rendu Biotechnology is expected to under-perform the Northking Information. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Rendu Biotechnology is 1.41 times less risky than Northking Information. The stock trades about -0.05 of its potential returns per unit of risk. The Northking Information Technology is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,493  in Northking Information Technology on November 28, 2024 and sell it today you would earn a total of  752.00  from holding Northking Information Technology or generate 50.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Shanghai Rendu Biotechnology  vs.  Northking Information Technolo

Shanghai Rendu Biote

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Rendu Biotechnology 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.

Northking Information

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northking Information Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Northking Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Rendu and Northking Information

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

The idea behind Shanghai Rendu Biotechnology and Northking Information 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.