Correlation Between Chengdu Spaceon and China Northern

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

By analyzing existing cross correlation between Chengdu Spaceon Electronics and China Northern Rare, you can compare the effects of market volatilities on Chengdu Spaceon and China Northern 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 Spaceon with a short position of China Northern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Spaceon and China Northern.

Diversification Opportunities for Chengdu Spaceon and China Northern

0.8

Correlation Coefficient

Chengdu Spaceon  China Northern

Very poor diversification

The 3 months correlation between Chengdu and China is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Spaceon Electronics and China Northern Rare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Northern Rare and Chengdu Spaceon 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 Spaceon Electronics are associated (or correlated) with China Northern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Northern Rare has no effect on the direction of Chengdu Spaceon i.e., Chengdu Spaceon and China Northern go up and down completely randomly.

Pair Corralation between Chengdu Spaceon and China Northern

Assuming the 90 days trading horizon Chengdu Spaceon is expected to generate 1.06 times less return on investment than China Northern. But when comparing it to its historical volatility, Chengdu Spaceon Electronics is 1.01 times less risky than China Northern. It trades about 0.19 of its potential returns per unit of risk. China Northern Rare is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,608  in China Northern Rare on September 14, 2024 and sell it today you would earn a total of  688.00  from holding China Northern Rare or generate 42.79% return on investment over 90 days.

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

Chengdu Spaceon Electronics  vs.  China Northern Rare

Chengdu Spaceon Elec

Risk-Adjusted Performance

14 of 100

Good

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

China Northern Rare

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Northern Rare are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Northern sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chengdu Spaceon and China Northern

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

The idea behind Chengdu Spaceon Electronics and China Northern Rare 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..