Correlation Between AVIC UAS and Inspur Software

Can any of the company-specific risk be diversified away by investing in both AVIC UAS and Inspur Software 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 AVIC UAS and Inspur Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AVIC UAS Co and Inspur Software Co, you can compare the effects of market volatilities on AVIC UAS and Inspur Software 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 AVIC UAS with a short position of Inspur Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVIC UAS and Inspur Software.

Diversification Opportunities for AVIC UAS and Inspur Software

0.84

Correlation Coefficient

AVIC UAS  Inspur Software

Very poor diversification

The 3 months correlation between AVIC and Inspur is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding AVIC UAS Co and Inspur Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspur Software and AVIC UAS 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 AVIC UAS Co are associated (or correlated) with Inspur Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspur Software has no effect on the direction of AVIC UAS i.e., AVIC UAS and Inspur Software go up and down completely randomly.

Pair Corralation between AVIC UAS and Inspur Software

Assuming the 90 days trading horizon AVIC UAS is expected to generate 2.23 times less return on investment than Inspur Software. In addition to that, AVIC UAS is 1.08 times more volatile than Inspur Software Co. It trades about 0.01 of its total potential returns per unit of risk. Inspur Software Co is currently generating about 0.02 per unit of volatility. If you would invest  1,388  in Inspur Software Co on October 4, 2024 and sell it today you would earn a total of  45.00  from holding Inspur Software Co or generate 3.24% return on investment over 90 days.

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

AVIC UAS Co  vs.  Inspur Software Co

AVIC UAS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Inspur Software

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with AVIC UAS and Inspur Software

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

The idea behind AVIC UAS Co and Inspur Software Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.