Correlation Between Information Technology and YuantaP Shares

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

By analyzing existing cross correlation between Information Technology Total and YuantaP shares SSE50, you can compare the effects of market volatilities on Information Technology and YuantaP Shares 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 Information Technology with a short position of YuantaP Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and YuantaP Shares.

Diversification Opportunities for Information Technology and YuantaP Shares

0.29

Correlation Coefficient

Information Technology  YuantaP Shares

Modest diversification

The 3 months correlation between Information and YuantaP is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and YuantaP shares SSE50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YuantaP shares SSE50 and Information Technology 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 Information Technology Total are associated (or correlated) with YuantaP Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YuantaP shares SSE50 has no effect on the direction of Information Technology i.e., Information Technology and YuantaP Shares go up and down completely randomly.

Pair Corralation between Information Technology and YuantaP Shares

Assuming the 90 days trading horizon Information Technology Total is expected to generate 2.27 times more return on investment than YuantaP Shares. However, Information Technology is 2.27 times more volatile than YuantaP shares SSE50. It trades about 0.03 of its potential returns per unit of risk. YuantaP shares SSE50 is currently generating about 0.01 per unit of risk. If you would invest  3,558  in Information Technology Total on September 6, 2024 and sell it today you would earn a total of  1,032  from holding Information Technology Total or generate 29.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Information Technology Total  vs.  YuantaP shares SSE50

Information Technology

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Information Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

YuantaP shares SSE50

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YuantaP shares SSE50 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, YuantaP Shares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Information Technology and YuantaP Shares

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

The idea behind Information Technology Total and YuantaP shares SSE50 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.