Correlation Between Cambricon Technologies and Shanghai Rightongene

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

Diversification Opportunities for Cambricon Technologies and Shanghai Rightongene

0.93

Correlation Coefficient

Cambricon Technologies  Shanghai Rightongene

Almost no diversification

The 3 months correlation between Cambricon and Shanghai is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Cambricon Technologies Corp and Shanghai Rightongene Biotechno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Rightongene 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 Shanghai Rightongene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Rightongene has no effect on the direction of Cambricon Technologies i.e., Cambricon Technologies and Shanghai Rightongene go up and down completely randomly.

Pair Corralation between Cambricon Technologies and Shanghai Rightongene

Assuming the 90 days trading horizon Cambricon Technologies Corp is expected to generate 1.35 times more return on investment than Shanghai Rightongene. However, Cambricon Technologies is 1.35 times more volatile than Shanghai Rightongene Biotechnology. It trades about 0.24 of its potential returns per unit of risk. Shanghai Rightongene Biotechnology is currently generating about 0.15 per unit of risk. If you would invest  25,214  in Cambricon Technologies Corp on September 2, 2024 and sell it today you would earn a total of  30,886  from holding Cambricon Technologies Corp or generate 122.5% return on investment over 90 days.

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

Cambricon Technologies Corp  vs.  Shanghai Rightongene Biotechno

Cambricon Technologies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cambricon Technologies Corp are ranked lower than 19 (%) 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.

Shanghai Rightongene

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Rightongene Biotechnology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Rightongene sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cambricon Technologies and Shanghai Rightongene

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

The idea behind Cambricon Technologies Corp and Shanghai Rightongene Biotechnology 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.