Correlation Between Shijiazhuang Tonhe and Northking Information

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

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

Diversification Opportunities for Shijiazhuang Tonhe and Northking Information

0.75

Correlation Coefficient

Shijiazhuang Tonhe  Northking Information

Poor diversification

The 3 months correlation between Shijiazhuang and Northking is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shijiazhuang Tonhe Electronics and Northking Information Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northking Information and Shijiazhuang Tonhe 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 Shijiazhuang Tonhe Electronics 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 Shijiazhuang Tonhe i.e., Shijiazhuang Tonhe and Northking Information go up and down completely randomly.

Pair Corralation between Shijiazhuang Tonhe and Northking Information

Assuming the 90 days trading horizon Shijiazhuang Tonhe Electronics is expected to generate 0.95 times more return on investment than Northking Information. However, Shijiazhuang Tonhe Electronics is 1.05 times less risky than Northking Information. It trades about 0.12 of its potential returns per unit of risk. Northking Information Technology is currently generating about 0.1 per unit of risk. If you would invest  1,364  in Shijiazhuang Tonhe Electronics on September 25, 2024 and sell it today you would earn a total of  353.00  from holding Shijiazhuang Tonhe Electronics or generate 25.88% return on investment over 90 days.

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

Shijiazhuang Tonhe Electronics  vs.  Northking Information Technolo

Shijiazhuang Tonhe

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shijiazhuang Tonhe Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shijiazhuang Tonhe sustained solid returns over the last few months and may actually be approaching a breakup point.

Northking Information

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northking Information Technology are ranked lower than 7 (%) 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 Shijiazhuang Tonhe and Northking Information

The main advantage of trading using opposite Shijiazhuang Tonhe and Northking Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shijiazhuang Tonhe 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 Shijiazhuang Tonhe Electronics 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.