Correlation Between China Man and Everlight Chemical
Can any of the company-specific risk be diversified away by investing in both China Man and Everlight Chemical 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 Man and Everlight Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Man Made Fiber and Everlight Chemical Industrial, you can compare the effects of market volatilities on China Man and Everlight Chemical 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 Man with a short position of Everlight Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Man and Everlight Chemical.
Diversification Opportunities for China Man and Everlight Chemical
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and Everlight is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding China Man Made Fiber and Everlight Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everlight Chemical and China Man 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 Man Made Fiber are associated (or correlated) with Everlight Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everlight Chemical has no effect on the direction of China Man i.e., China Man and Everlight Chemical go up and down completely randomly.
Pair Corralation between China Man and Everlight Chemical
Assuming the 90 days trading horizon China Man Made Fiber is expected to generate 0.62 times more return on investment than Everlight Chemical. However, China Man Made Fiber is 1.6 times less risky than Everlight Chemical. It trades about 0.07 of its potential returns per unit of risk. Everlight Chemical Industrial is currently generating about -0.04 per unit of risk. If you would invest 779.00 in China Man Made Fiber on September 6, 2024 and sell it today you would earn a total of 47.00 from holding China Man Made Fiber or generate 6.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
China Man Made Fiber vs. Everlight Chemical Industrial
Performance |
Timeline |
China Man Made |
Everlight Chemical |
China Man and Everlight Chemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Man and Everlight Chemical
The main advantage of trading using opposite China Man and Everlight Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Man position performs unexpectedly, Everlight Chemical 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 Everlight Chemical will offset losses from the drop in Everlight Chemical's long position.China Man vs. Oriental Union Chemical | China Man vs. China Petrochemical Development | China Man vs. Taiwan Styrene Monomer | China Man vs. Grand Pacific Petrochemical |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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