Correlation Between Chengdu Xinzhu and Topsec Technologies

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

By analyzing existing cross correlation between Chengdu Xinzhu RoadBridge and Topsec Technologies Group, you can compare the effects of market volatilities on Chengdu Xinzhu and Topsec Technologies 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 Chengdu Xinzhu with a short position of Topsec Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Xinzhu and Topsec Technologies.

Diversification Opportunities for Chengdu Xinzhu and Topsec Technologies

0.91

Correlation Coefficient

Chengdu Xinzhu  Topsec Technologies

Almost no diversification

The 3 months correlation between Chengdu and Topsec is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Xinzhu RoadBridge and Topsec Technologies Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topsec Technologies and Chengdu Xinzhu 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 Chengdu Xinzhu RoadBridge are associated (or correlated) with Topsec Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topsec Technologies has no effect on the direction of Chengdu Xinzhu i.e., Chengdu Xinzhu and Topsec Technologies go up and down completely randomly.

Pair Corralation between Chengdu Xinzhu and Topsec Technologies

Assuming the 90 days trading horizon Chengdu Xinzhu is expected to generate 1.23 times less return on investment than Topsec Technologies. But when comparing it to its historical volatility, Chengdu Xinzhu RoadBridge is 1.05 times less risky than Topsec Technologies. It trades about 0.21 of its potential returns per unit of risk. Topsec Technologies Group is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  427.00  in Topsec Technologies Group on September 12, 2024 and sell it today you would earn a total of  304.00  from holding Topsec Technologies Group or generate 71.19% return on investment over 90 days.

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

Chengdu Xinzhu RoadBridge  vs.  Topsec Technologies Group

Chengdu Xinzhu RoadBridge

Risk-Adjusted Performance

16 of 100

Good

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

Topsec Technologies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Topsec Technologies Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Topsec Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chengdu Xinzhu and Topsec Technologies

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

The idea behind Chengdu Xinzhu RoadBridge and Topsec Technologies 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.

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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.