Correlation Between Risuntek and Datang HuaYin

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

Diversification Opportunities for Risuntek and Datang HuaYin

0.84
  Correlation Coefficient

Very poor diversification

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

Pair Corralation between Risuntek and Datang HuaYin

Assuming the 90 days trading horizon Risuntek is expected to generate 1.41 times more return on investment than Datang HuaYin. However, Risuntek is 1.41 times more volatile than Datang HuaYin Electric. It trades about 0.03 of its potential returns per unit of risk. Datang HuaYin Electric is currently generating about -0.01 per unit of risk. If you would invest  1,876  in Risuntek on September 3, 2024 and sell it today you would earn a total of  626.00  from holding Risuntek or generate 33.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Risuntek  vs.  Datang HuaYin Electric

 Performance 
       Timeline  
Risuntek 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Risuntek are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Risuntek sustained solid returns over the last few months and may actually be approaching a breakup point.
Datang HuaYin Electric 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Datang HuaYin Electric are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Datang HuaYin sustained solid returns over the last few months and may actually be approaching a breakup point.

Risuntek and Datang HuaYin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Risuntek and Datang HuaYin

The main advantage of trading using opposite Risuntek and Datang HuaYin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Risuntek position performs unexpectedly, Datang HuaYin 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 Datang HuaYin will offset losses from the drop in Datang HuaYin's long position.
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The idea behind Risuntek and Datang HuaYin 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.
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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