Correlation Between Changchun and Northking Information

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

By analyzing existing cross correlation between Changchun UP Optotech and Northking Information Technology, you can compare the effects of market volatilities on Changchun and Northking Information 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 Changchun with a short position of Northking Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changchun and Northking Information.

Diversification Opportunities for Changchun and Northking Information

0.79

Correlation Coefficient

Changchun  Northking Information

Poor diversification

The 3 months correlation between Changchun and Northking is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Changchun UP Optotech and Northking Information Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northking Information and Changchun 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 Changchun UP Optotech are associated (or correlated) with Northking Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northking Information has no effect on the direction of Changchun i.e., Changchun and Northking Information go up and down completely randomly.

Pair Corralation between Changchun and Northking Information

Assuming the 90 days trading horizon Changchun UP Optotech is expected to generate 1.02 times more return on investment than Northking Information. However, Changchun is 1.02 times more volatile than Northking Information Technology. It trades about 0.22 of its potential returns per unit of risk. Northking Information Technology is currently generating about 0.21 per unit of risk. If you would invest  2,670  in Changchun UP Optotech on September 14, 2024 and sell it today you would earn a total of  1,624  from holding Changchun UP Optotech or generate 60.82% return on investment over 90 days.

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

Changchun UP Optotech  vs.  Northking Information Technolo

Changchun UP Optotech

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Changchun UP Optotech are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changchun sustained solid returns over the last few months and may actually be approaching a breakup point.

Northking Information

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Changchun and Northking Information

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

The idea behind Changchun UP Optotech and Northking Information 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .