Correlation Between Chengdu Spaceon and Hangzhou Gaoxin

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Can any of the company-specific risk be diversified away by investing in both Chengdu Spaceon and Hangzhou Gaoxin 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 Chengdu Spaceon and Hangzhou Gaoxin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chengdu Spaceon Electronics and Hangzhou Gaoxin Rubber, you can compare the effects of market volatilities on Chengdu Spaceon and Hangzhou Gaoxin 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 Chengdu Spaceon with a short position of Hangzhou Gaoxin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Spaceon and Hangzhou Gaoxin.

Diversification Opportunities for Chengdu Spaceon and Hangzhou Gaoxin

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Chengdu and Hangzhou is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Spaceon Electronics and Hangzhou Gaoxin Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Gaoxin Rubber and Chengdu Spaceon 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 Chengdu Spaceon Electronics are associated (or correlated) with Hangzhou Gaoxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Gaoxin Rubber has no effect on the direction of Chengdu Spaceon i.e., Chengdu Spaceon and Hangzhou Gaoxin go up and down completely randomly.

Pair Corralation between Chengdu Spaceon and Hangzhou Gaoxin

Assuming the 90 days trading horizon Chengdu Spaceon Electronics is expected to under-perform the Hangzhou Gaoxin. But the stock apears to be less risky and, when comparing its historical volatility, Chengdu Spaceon Electronics is 1.13 times less risky than Hangzhou Gaoxin. The stock trades about -0.1 of its potential returns per unit of risk. The Hangzhou Gaoxin Rubber is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  927.00  in Hangzhou Gaoxin Rubber on August 25, 2024 and sell it today you would earn a total of  148.00  from holding Hangzhou Gaoxin Rubber or generate 15.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

Chengdu Spaceon Electronics  vs.  Hangzhou Gaoxin Rubber

 Performance 
       Timeline  
Chengdu Spaceon Elec 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Chengdu Spaceon Electronics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengdu Spaceon sustained solid returns over the last few months and may actually be approaching a breakup point.
Hangzhou Gaoxin Rubber 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Hangzhou Gaoxin Rubber are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hangzhou Gaoxin sustained solid returns over the last few months and may actually be approaching a breakup point.

Chengdu Spaceon and Hangzhou Gaoxin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chengdu Spaceon and Hangzhou Gaoxin

The main advantage of trading using opposite Chengdu Spaceon and Hangzhou Gaoxin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chengdu Spaceon position performs unexpectedly, Hangzhou Gaoxin 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 Hangzhou Gaoxin will offset losses from the drop in Hangzhou Gaoxin's long position.
The idea behind Chengdu Spaceon Electronics and Hangzhou Gaoxin Rubber 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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