Correlation Between Aurora Optoelectronics and Zhejiang Kingland

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

By analyzing existing cross correlation between Aurora Optoelectronics Co and Zhejiang Kingland Pipeline, you can compare the effects of market volatilities on Aurora Optoelectronics and Zhejiang Kingland 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 Aurora Optoelectronics with a short position of Zhejiang Kingland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Optoelectronics and Zhejiang Kingland.

Diversification Opportunities for Aurora Optoelectronics and Zhejiang Kingland

0.45

Correlation Coefficient

Aurora Optoelectronics  Zhejiang Kingland

Very weak diversification

The 3 months correlation between Aurora and Zhejiang is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Optoelectronics Co and Zhejiang Kingland Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Kingland and Aurora Optoelectronics 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 Aurora Optoelectronics Co are associated (or correlated) with Zhejiang Kingland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Kingland has no effect on the direction of Aurora Optoelectronics i.e., Aurora Optoelectronics and Zhejiang Kingland go up and down completely randomly.

Pair Corralation between Aurora Optoelectronics and Zhejiang Kingland

Assuming the 90 days trading horizon Aurora Optoelectronics Co is expected to generate 3.12 times more return on investment than Zhejiang Kingland. However, Aurora Optoelectronics is 3.12 times more volatile than Zhejiang Kingland Pipeline. It trades about 0.02 of its potential returns per unit of risk. Zhejiang Kingland Pipeline is currently generating about -0.15 per unit of risk. If you would invest  251.00  in Aurora Optoelectronics Co on September 28, 2024 and sell it today you would lose (1.00) from holding Aurora Optoelectronics Co or give up 0.4% of portfolio value over 90 days.

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

Aurora Optoelectronics Co  vs.  Zhejiang Kingland Pipeline

Aurora Optoelectronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Optoelectronics Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aurora Optoelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhejiang Kingland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Kingland Pipeline has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Zhejiang Kingland is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aurora Optoelectronics and Zhejiang Kingland

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

The idea behind Aurora Optoelectronics Co and Zhejiang Kingland Pipeline 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.