Correlation Between SohuCom and Cool
Can any of the company-specific risk be diversified away by investing in both SohuCom and Cool 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 SohuCom and Cool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SohuCom and Cool Company, you can compare the effects of market volatilities on SohuCom and Cool 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 SohuCom with a short position of Cool. Check out your portfolio center. Please also check ongoing floating volatility patterns of SohuCom and Cool.
Diversification Opportunities for SohuCom and Cool
Excellent diversification
The 3 months correlation between SohuCom and Cool is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding SohuCom and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company and SohuCom 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 SohuCom are associated (or correlated) with Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of SohuCom i.e., SohuCom and Cool go up and down completely randomly.
Pair Corralation between SohuCom and Cool
Given the investment horizon of 90 days SohuCom is expected to generate 1.44 times more return on investment than Cool. However, SohuCom is 1.44 times more volatile than Cool Company. It trades about 0.19 of its potential returns per unit of risk. Cool Company is currently generating about -0.32 per unit of risk. If you would invest 1,284 in SohuCom on November 25, 2024 and sell it today you would earn a total of 161.00 from holding SohuCom or generate 12.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
SohuCom vs. Cool Company
Performance |
Timeline |
SohuCom |
Cool Company |
SohuCom and Cool Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SohuCom and Cool
The main advantage of trading using opposite SohuCom and Cool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SohuCom position performs unexpectedly, Cool 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 Cool will offset losses from the drop in Cool's long position.SohuCom vs. Snail, Class A | ||
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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