Correlation Between Energy Focu and Viomi Technology

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

By analyzing existing cross correlation between Energy Focu and Viomi Technology ADR, you can compare the effects of market volatilities on Energy Focu and Viomi Technology 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 Energy Focu with a short position of Viomi Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Focu and Viomi Technology.

Diversification Opportunities for Energy Focu and Viomi Technology

0.64

Correlation Coefficient

Energy Focu  Viomi Technology

Poor diversification

The 3 months correlation between Energy and Viomi is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Energy Focu and Viomi Technology ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viomi Technology ADR and Energy Focu 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 Energy Focu are associated (or correlated) with Viomi Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viomi Technology ADR has no effect on the direction of Energy Focu i.e., Energy Focu and Viomi Technology go up and down completely randomly.

Pair Corralation between Energy Focu and Viomi Technology

Given the investment horizon of 90 days Energy Focu is expected to generate 2.11 times more return on investment than Viomi Technology. However, Energy Focu is 2.11 times more volatile than Viomi Technology ADR. It trades about 0.1 of its potential returns per unit of risk. Viomi Technology ADR is currently generating about 0.09 per unit of risk. If you would invest  121.00  in Energy Focu on December 28, 2024 and sell it today you would earn a total of  72.00  from holding Energy Focu or generate 59.5% return on investment over 90 days.

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

Energy Focu  vs.  Viomi Technology ADR

Energy Focu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Focu are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Energy Focu demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Viomi Technology ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Viomi Technology ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Viomi Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Focu and Viomi Technology

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

The idea behind Energy Focu and Viomi Technology ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.