Correlation Between China Man and China Glaze

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

Diversification Opportunities for China Man and China Glaze

0.5

Correlation Coefficient

China Man  China Glaze

Very weak diversification

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

Pair Corralation between China Man and China Glaze

Assuming the 90 days trading horizon China Man is expected to generate 1.52 times less return on investment than China Glaze. But when comparing it to its historical volatility, China Man Made Fiber is 1.93 times less risky than China Glaze. It trades about 0.07 of its potential returns per unit of risk. China Glaze Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,010  in China Glaze Co on September 5, 2024 and sell it today you would earn a total of  150.00  from holding China Glaze Co or generate 7.46% 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.  China Glaze Co

China Man Made

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Man Made Fiber are ranked lower than 5 (%) 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.

China Glaze

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Glaze Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Glaze may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Man and China Glaze

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

The idea behind China Man Made Fiber and China Glaze Co 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 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.