Correlation Between ROPEOK Technology and Shanghai Rendu

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

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

Diversification Opportunities for ROPEOK Technology and Shanghai Rendu

0.69

Correlation Coefficient

ROPEOK Technology  Shanghai Rendu

Poor diversification

The 3 months correlation between ROPEOK and Shanghai is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ROPEOK Technology Group and Shanghai Rendu Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Rendu Biote and ROPEOK Technology 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 ROPEOK Technology Group are associated (or correlated) with Shanghai Rendu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Rendu Biote has no effect on the direction of ROPEOK Technology i.e., ROPEOK Technology and Shanghai Rendu go up and down completely randomly.

Pair Corralation between ROPEOK Technology and Shanghai Rendu

Assuming the 90 days trading horizon ROPEOK Technology Group is expected to generate 1.17 times more return on investment than Shanghai Rendu. However, ROPEOK Technology is 1.17 times more volatile than Shanghai Rendu Biotechnology. It trades about 0.06 of its potential returns per unit of risk. Shanghai Rendu Biotechnology is currently generating about -0.05 per unit of risk. If you would invest  932.00  in ROPEOK Technology Group on November 28, 2024 and sell it today you would earn a total of  81.00  from holding ROPEOK Technology Group or generate 8.69% return on investment over 90 days.

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

ROPEOK Technology Group  vs.  Shanghai Rendu Biotechnology

ROPEOK Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ROPEOK Technology Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ROPEOK Technology may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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.

Pair Trading with ROPEOK Technology and Shanghai Rendu

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

The idea behind ROPEOK Technology Group and Shanghai Rendu 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.