Correlation Between China Metal and C Media

Can any of the company-specific risk be diversified away by investing in both China Metal and C Media 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 C Media 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 C Media Electronics, you can compare the effects of market volatilities on China Metal and C Media 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 C Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and C Media.

Diversification Opportunities for China Metal and C Media

0.06

Correlation Coefficient

China Metal  C Media

Significant diversification

The 3 months correlation between China and 6237 is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and C Media Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C Media Electronics 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 C Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C Media Electronics has no effect on the direction of China Metal i.e., China Metal and C Media go up and down completely randomly.

Pair Corralation between China Metal and C Media

Assuming the 90 days trading horizon China Metal Products is expected to under-perform the C Media. In addition to that, China Metal is 1.14 times more volatile than C Media Electronics. It trades about -0.19 of its total potential returns per unit of risk. C Media Electronics is currently generating about -0.1 per unit of volatility. If you would invest  4,985  in C Media Electronics on September 1, 2024 and sell it today you would lose (205.00) from holding C Media Electronics or give up 4.11% of portfolio value over 90 days.

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

China Metal Products  vs.  C Media Electronics

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 December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

C Media Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in C Media Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, C Media 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 C Media

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

The idea behind China Metal Products and C Media Electronics 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.