Correlation Between China Nonferrous and Zhongshan Broad

Can any of the company-specific risk be diversified away by investing in both China Nonferrous and Zhongshan Broad 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 China Nonferrous and Zhongshan Broad into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Nonferrous Metal and Zhongshan Broad Ocean Motor, you can compare the effects of market volatilities on China Nonferrous and Zhongshan Broad 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 Nonferrous with a short position of Zhongshan Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Nonferrous and Zhongshan Broad.

Diversification Opportunities for China Nonferrous and Zhongshan Broad

0.95

Correlation Coefficient

China Nonferrous  Zhongshan Broad

Almost no diversification

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

Pair Corralation between China Nonferrous and Zhongshan Broad

Assuming the 90 days trading horizon China Nonferrous Metal is expected to generate 1.25 times more return on investment than Zhongshan Broad. However, China Nonferrous is 1.25 times more volatile than Zhongshan Broad Ocean Motor. It trades about 0.14 of its potential returns per unit of risk. Zhongshan Broad Ocean Motor is currently generating about 0.13 per unit of risk. If you would invest  407.00  in China Nonferrous Metal on September 23, 2024 and sell it today you would earn a total of  98.00  from holding China Nonferrous Metal or generate 24.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

China Nonferrous Metal  vs.  Zhongshan Broad Ocean Motor

China Nonferrous Metal

Risk-Adjusted Performance

10 of 100

OK

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

Zhongshan Broad Ocean

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Broad Ocean Motor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Broad sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Nonferrous and Zhongshan Broad

The main advantage of trading using opposite China Nonferrous and Zhongshan Broad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Nonferrous position performs unexpectedly, Zhongshan Broad 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 Zhongshan Broad will offset losses from the drop in Zhongshan Broad's long position.

The idea behind China Nonferrous Metal and Zhongshan Broad Ocean Motor 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..