Correlation Between HeNan Splendor and ROPEOK Technology

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

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

Diversification Opportunities for HeNan Splendor and ROPEOK Technology

0.9

Correlation Coefficient

HeNan Splendor  ROPEOK Technology

Almost no diversification

The 3 months correlation between HeNan and ROPEOK is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding HeNan Splendor Science and ROPEOK Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROPEOK Technology and HeNan Splendor 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 HeNan Splendor Science are associated (or correlated) with ROPEOK Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROPEOK Technology has no effect on the direction of HeNan Splendor i.e., HeNan Splendor and ROPEOK Technology go up and down completely randomly.

Pair Corralation between HeNan Splendor and ROPEOK Technology

Assuming the 90 days trading horizon HeNan Splendor is expected to generate 1.44 times less return on investment than ROPEOK Technology. But when comparing it to its historical volatility, HeNan Splendor Science is 1.26 times less risky than ROPEOK Technology. It trades about 0.19 of its potential returns per unit of risk. ROPEOK Technology Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  595.00  in ROPEOK Technology Group on September 4, 2024 and sell it today you would earn a total of  368.00  from holding ROPEOK Technology Group or generate 61.85% return on investment over 90 days.

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

HeNan Splendor Science  vs.  ROPEOK Technology Group

HeNan Splendor Science

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HeNan Splendor Science are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HeNan Splendor sustained solid returns over the last few months and may actually be approaching a breakup point.

ROPEOK Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ROPEOK Technology Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ROPEOK Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HeNan Splendor and ROPEOK Technology

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

The idea behind HeNan Splendor Science and ROPEOK Technology Group 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.