Correlation Between Cambricon Technologies and Beijing Quanshi

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

Diversification Opportunities for Cambricon Technologies and Beijing Quanshi

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Cambricon and Beijing is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Cambricon Technologies Corp and Beijing Quanshi World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Quanshi World and Cambricon Technologies 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 Cambricon Technologies Corp are associated (or correlated) with Beijing Quanshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Quanshi World has no effect on the direction of Cambricon Technologies i.e., Cambricon Technologies and Beijing Quanshi go up and down completely randomly.

Pair Corralation between Cambricon Technologies and Beijing Quanshi

Assuming the 90 days trading horizon Cambricon Technologies Corp is expected to generate 1.2 times more return on investment than Beijing Quanshi. However, Cambricon Technologies is 1.2 times more volatile than Beijing Quanshi World. It trades about 0.09 of its potential returns per unit of risk. Beijing Quanshi World is currently generating about 0.01 per unit of risk. If you would invest  17,600  in Cambricon Technologies Corp on September 12, 2024 and sell it today you would earn a total of  36,243  from holding Cambricon Technologies Corp or generate 205.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Cambricon Technologies Corp  vs.  Beijing Quanshi World

 Performance 
       Timeline  
Cambricon Technologies 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Cambricon Technologies Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cambricon Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.
Beijing Quanshi World 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Quanshi World are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Quanshi sustained solid returns over the last few months and may actually be approaching a breakup point.

Cambricon Technologies and Beijing Quanshi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cambricon Technologies and Beijing Quanshi

The main advantage of trading using opposite Cambricon Technologies and Beijing Quanshi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambricon Technologies position performs unexpectedly, Beijing Quanshi 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 Beijing Quanshi will offset losses from the drop in Beijing Quanshi's long position.
The idea behind Cambricon Technologies Corp and Beijing Quanshi World 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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