Correlation Between China Metal and Ma Kuang

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

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

Diversification Opportunities for China Metal and Ma Kuang

0.5

Correlation Coefficient

China Metal  Ma Kuang

Very weak diversification

The 3 months correlation between China and 4139 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Ma Kuang Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ma Kuang Healthcare and China Metal 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 Metal Products are associated (or correlated) with Ma Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ma Kuang Healthcare has no effect on the direction of China Metal i.e., China Metal and Ma Kuang go up and down completely randomly.

Pair Corralation between China Metal and Ma Kuang

Assuming the 90 days trading horizon China Metal Products is expected to under-perform the Ma Kuang. But the stock apears to be less risky and, when comparing its historical volatility, China Metal Products is 1.49 times less risky than Ma Kuang. The stock trades about -0.16 of its potential returns per unit of risk. The Ma Kuang Healthcare is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,110  in Ma Kuang Healthcare on September 15, 2024 and sell it today you would lose (115.00) from holding Ma Kuang Healthcare or give up 3.7% of portfolio value over 90 days.

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

China Metal Products  vs.  Ma Kuang Healthcare

China Metal Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Metal Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ma Kuang Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ma Kuang Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ma Kuang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with China Metal and Ma Kuang

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

The idea behind China Metal Products and Ma Kuang Healthcare 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.