Correlation Between Inspur Software and Bengang Steel

Can any of the company-specific risk be diversified away by investing in both Inspur Software and Bengang Steel 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 Inspur Software and Bengang Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Inspur Software Co and Bengang Steel Plates, you can compare the effects of market volatilities on Inspur Software and Bengang Steel 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 Inspur Software with a short position of Bengang Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspur Software and Bengang Steel.

Diversification Opportunities for Inspur Software and Bengang Steel

0.88

Correlation Coefficient

Inspur Software  Bengang Steel

Very poor diversification

The 3 months correlation between Inspur and Bengang is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Inspur Software Co and Bengang Steel Plates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bengang Steel Plates and Inspur Software 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 Inspur Software Co are associated (or correlated) with Bengang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bengang Steel Plates has no effect on the direction of Inspur Software i.e., Inspur Software and Bengang Steel go up and down completely randomly.

Pair Corralation between Inspur Software and Bengang Steel

Assuming the 90 days trading horizon Inspur Software Co is expected to generate 1.02 times more return on investment than Bengang Steel. However, Inspur Software is 1.02 times more volatile than Bengang Steel Plates. It trades about 0.04 of its potential returns per unit of risk. Bengang Steel Plates is currently generating about -0.06 per unit of risk. If you would invest  1,477  in Inspur Software Co on September 27, 2024 and sell it today you would earn a total of  19.00  from holding Inspur Software Co or generate 1.29% return on investment over 90 days.

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

Inspur Software Co  vs.  Bengang Steel Plates

Inspur Software

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inspur Software Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Inspur Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Bengang Steel Plates

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Inspur Software and Bengang Steel

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

The idea behind Inspur Software Co and Bengang Steel Plates 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.