Correlation Between Glodon Software and HeNan Splendor

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

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

Diversification Opportunities for Glodon Software and HeNan Splendor

0.14

Correlation Coefficient

Glodon Software  HeNan Splendor

Average diversification

The 3 months correlation between Glodon and HeNan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Glodon Software Co and HeNan Splendor Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeNan Splendor Science and Glodon Software 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 Glodon Software Co are associated (or correlated) with HeNan Splendor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeNan Splendor Science has no effect on the direction of Glodon Software i.e., Glodon Software and HeNan Splendor go up and down completely randomly.

Pair Corralation between Glodon Software and HeNan Splendor

Assuming the 90 days trading horizon Glodon Software Co is expected to generate 1.15 times more return on investment than HeNan Splendor. However, Glodon Software is 1.15 times more volatile than HeNan Splendor Science. It trades about 0.06 of its potential returns per unit of risk. HeNan Splendor Science is currently generating about 0.06 per unit of risk. If you would invest  1,040  in Glodon Software Co on September 28, 2024 and sell it today you would earn a total of  179.00  from holding Glodon Software Co or generate 17.21% return on investment over 90 days.

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

Glodon Software Co  vs.  HeNan Splendor Science

Glodon Software

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Glodon Software Co 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.

HeNan Splendor Science

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HeNan Splendor Science are ranked lower than 4 (%) 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.

Pair Trading with Glodon Software and HeNan Splendor

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

The idea behind Glodon Software Co and HeNan Splendor Science 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.