Correlation Between Ideal Power and CBAK Energy

Can any of the company-specific risk be diversified away by investing in both Ideal Power and CBAK Energy 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 Ideal Power and CBAK Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ideal Power and CBAK Energy Technology, you can compare the effects of market volatilities on Ideal Power and CBAK Energy 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 Ideal Power with a short position of CBAK Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ideal Power and CBAK Energy.

Diversification Opportunities for Ideal Power and CBAK Energy

0.55

Correlation Coefficient

Ideal Power  CBAK Energy

Very weak diversification

The 3 months correlation between Ideal and CBAK is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ideal Power and CBAK Energy Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBAK Energy Technology and Ideal Power 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 Ideal Power are associated (or correlated) with CBAK Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBAK Energy Technology has no effect on the direction of Ideal Power i.e., Ideal Power and CBAK Energy go up and down completely randomly.

Pair Corralation between Ideal Power and CBAK Energy

Given the investment horizon of 90 days Ideal Power is expected to under-perform the CBAK Energy. But the stock apears to be less risky and, when comparing its historical volatility, Ideal Power is 1.12 times less risky than CBAK Energy. The stock trades about -0.09 of its potential returns per unit of risk. The CBAK Energy Technology is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  101.00  in CBAK Energy Technology on August 30, 2024 and sell it today you would lose (6.00) from holding CBAK Energy Technology or give up 5.94% of portfolio value over 90 days.

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

Ideal Power  vs.  CBAK Energy Technology

Ideal Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ideal Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

CBAK Energy Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBAK Energy Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CBAK Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ideal Power and CBAK Energy

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

The idea behind Ideal Power and CBAK Energy 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.