Correlation Between Caihong Display and Techshine Electronics

Can any of the company-specific risk be diversified away by investing in both Caihong Display and Techshine Electronics 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 Caihong Display and Techshine Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caihong Display Devices and Techshine Electronics Co, you can compare the effects of market volatilities on Caihong Display and Techshine Electronics 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 Caihong Display with a short position of Techshine Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caihong Display and Techshine Electronics.

Diversification Opportunities for Caihong Display and Techshine Electronics

0.91

Correlation Coefficient

Caihong Display  Techshine Electronics

Almost no diversification

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

Pair Corralation between Caihong Display and Techshine Electronics

Assuming the 90 days trading horizon Caihong Display is expected to generate 1.28 times less return on investment than Techshine Electronics. But when comparing it to its historical volatility, Caihong Display Devices is 1.2 times less risky than Techshine Electronics. It trades about 0.15 of its potential returns per unit of risk. Techshine Electronics Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,525  in Techshine Electronics Co on September 13, 2024 and sell it today you would earn a total of  536.00  from holding Techshine Electronics Co or generate 35.15% return on investment over 90 days.

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

Caihong Display Devices  vs.  Techshine Electronics Co

Caihong Display Devices

Risk-Adjusted Performance

11 of 100

Good

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

Techshine Electronics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Techshine Electronics Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Techshine Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caihong Display and Techshine Electronics

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

The idea behind Caihong Display Devices and Techshine Electronics Co 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 Anywhere module to track or share privately all of your investments from the convenience of any device.