Correlation Between Cambricon Technologies and Changsha Jingjia

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

By analyzing existing cross correlation between Cambricon Technologies Corp and Changsha Jingjia Microelectronics, you can compare the effects of market volatilities on Cambricon Technologies and Changsha Jingjia 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 Cambricon Technologies with a short position of Changsha Jingjia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambricon Technologies and Changsha Jingjia.

Diversification Opportunities for Cambricon Technologies and Changsha Jingjia

0.66

Correlation Coefficient

Cambricon Technologies  Changsha Jingjia

Poor diversification

The 3 months correlation between Cambricon and Changsha is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cambricon Technologies Corp and Changsha Jingjia Microelectron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changsha Jingjia Mic and Cambricon Technologies 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 Cambricon Technologies Corp are associated (or correlated) with Changsha Jingjia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changsha Jingjia Mic has no effect on the direction of Cambricon Technologies i.e., Cambricon Technologies and Changsha Jingjia go up and down completely randomly.

Pair Corralation between Cambricon Technologies and Changsha Jingjia

Assuming the 90 days trading horizon Cambricon Technologies Corp is expected to generate 1.3 times more return on investment than Changsha Jingjia. However, Cambricon Technologies is 1.3 times more volatile than Changsha Jingjia Microelectronics. It trades about 0.13 of its potential returns per unit of risk. Changsha Jingjia Microelectronics is currently generating about 0.03 per unit of risk. If you would invest  12,390  in Cambricon Technologies Corp on October 6, 2024 and sell it today you would earn a total of  49,710  from holding Cambricon Technologies Corp or generate 401.21% return on investment over 90 days.

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

Cambricon Technologies Corp  vs.  Changsha Jingjia Microelectron

Cambricon Technologies

Risk-Adjusted Performance

16 of 100

Solid

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

Changsha Jingjia Mic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cambricon Technologies and Changsha Jingjia

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

The idea behind Cambricon Technologies Corp and Changsha Jingjia Microelectronics 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.