Correlation Between China Man and Champion Building

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

Diversification Opportunities for China Man and Champion Building

0.43

Correlation Coefficient

China Man  Champion Building

Very weak diversification

The 3 months correlation between China and Champion is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Man Made Fiber and Champion Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Building 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 Champion Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Building has no effect on the direction of China Man i.e., China Man and Champion Building go up and down completely randomly.

Pair Corralation between China Man and Champion Building

Assuming the 90 days trading horizon China Man Made Fiber is expected to generate 0.58 times more return on investment than Champion Building. However, China Man Made Fiber is 1.72 times less risky than Champion Building. It trades about 0.02 of its potential returns per unit of risk. Champion Building Materials is currently generating about -0.06 per unit of risk. If you would invest  808.00  in China Man Made Fiber on September 2, 2024 and sell it today you would earn a total of  11.00  from holding China Man Made Fiber or generate 1.36% return on investment over 90 days.

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

China Man Made Fiber  vs.  Champion Building Materials

China Man Made

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Man Made Fiber are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Man is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Champion Building

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with China Man and Champion Building

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

The idea behind China Man Made Fiber and Champion Building Materials 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.