Correlation Between China Longyuan and Changshu Ruite
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By analyzing existing cross correlation between China Longyuan Power and Changshu Ruite Electric, you can compare the effects of market volatilities on China Longyuan and Changshu Ruite 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 China Longyuan with a short position of Changshu Ruite. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Longyuan and Changshu Ruite.
Diversification Opportunities for China Longyuan and Changshu Ruite
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Changshu is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding China Longyuan Power and Changshu Ruite Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changshu Ruite Electric and China Longyuan 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 China Longyuan Power are associated (or correlated) with Changshu Ruite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changshu Ruite Electric has no effect on the direction of China Longyuan i.e., China Longyuan and Changshu Ruite go up and down completely randomly.
Pair Corralation between China Longyuan and Changshu Ruite
Assuming the 90 days trading horizon China Longyuan is expected to generate 2.42 times less return on investment than Changshu Ruite. But when comparing it to its historical volatility, China Longyuan Power is 1.71 times less risky than Changshu Ruite. It trades about 0.04 of its potential returns per unit of risk. Changshu Ruite Electric is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 690.00 in Changshu Ruite Electric on November 7, 2024 and sell it today you would earn a total of 12.00 from holding Changshu Ruite Electric or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Longyuan Power vs. Changshu Ruite Electric
Performance |
| Timeline |
| China Longyuan Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Changshu Ruite Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Longyuan and Changshu Ruite Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Longyuan and Changshu Ruite
The main advantage of trading using opposite China Longyuan and Changshu Ruite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Longyuan position performs unexpectedly, Changshu Ruite 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 Changshu Ruite will offset losses from the drop in Changshu Ruite's long position.The idea behind China Longyuan Power and Changshu Ruite Electric 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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