Correlation Between Shanghai CEO and INKON Life

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

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

Diversification Opportunities for Shanghai CEO and INKON Life

0.81

Correlation Coefficient

Shanghai CEO  INKON Life

Very poor diversification

The 3 months correlation between Shanghai and INKON is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai CEO Environmental and INKON Life Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INKON Life Technology and Shanghai CEO 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 CEO Environmental are associated (or correlated) with INKON Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INKON Life Technology has no effect on the direction of Shanghai CEO i.e., Shanghai CEO and INKON Life go up and down completely randomly.

Pair Corralation between Shanghai CEO and INKON Life

Assuming the 90 days trading horizon Shanghai CEO Environmental is expected to under-perform the INKON Life. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai CEO Environmental is 1.08 times less risky than INKON Life. The stock trades about -0.04 of its potential returns per unit of risk. The INKON Life Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  895.00  in INKON Life Technology on October 11, 2024 and sell it today you would earn a total of  17.00  from holding INKON Life Technology or generate 1.9% return on investment over 90 days.

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

Shanghai CEO Environmental  vs.  INKON Life Technology

Shanghai CEO Environ

Risk-Adjusted Performance

0 of 100

Very Weak

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

INKON Life Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INKON Life Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, INKON Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shanghai CEO and INKON Life

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

The idea behind Shanghai CEO Environmental and INKON Life 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.