Correlation Between Chongqing Machinery and UNIVMUSIC GRPADR050

Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery and UNIVMUSIC GRPADR050 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 Chongqing Machinery and UNIVMUSIC GRPADR050 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chongqing Machinery Electric and UNIVMUSIC GRPADR050, you can compare the effects of market volatilities on Chongqing Machinery and UNIVMUSIC GRPADR050 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 Chongqing Machinery with a short position of UNIVMUSIC GRPADR050. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and UNIVMUSIC GRPADR050.

Diversification Opportunities for Chongqing Machinery and UNIVMUSIC GRPADR050

0.16

Correlation Coefficient

Chongqing Machinery  UNIVMUSIC GRPADR050

Average diversification

The 3 months correlation between Chongqing and UNIVMUSIC is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and UNIVMUSIC GRPADR050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVMUSIC GRPADR050 and Chongqing Machinery 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 Chongqing Machinery Electric are associated (or correlated) with UNIVMUSIC GRPADR050. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVMUSIC GRPADR050 has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and UNIVMUSIC GRPADR050 go up and down completely randomly.

Pair Corralation between Chongqing Machinery and UNIVMUSIC GRPADR050

Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 2.41 times more return on investment than UNIVMUSIC GRPADR050. However, Chongqing Machinery is 2.41 times more volatile than UNIVMUSIC GRPADR050. It trades about 0.15 of its potential returns per unit of risk. UNIVMUSIC GRPADR050 is currently generating about 0.08 per unit of risk. If you would invest  5.95  in Chongqing Machinery Electric on September 19, 2024 and sell it today you would earn a total of  1.90  from holding Chongqing Machinery Electric or generate 31.93% return on investment over 90 days.

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

Chongqing Machinery Electric  vs.  UNIVMUSIC GRPADR050

Chongqing Machinery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Chongqing Machinery reported solid returns over the last few months and may actually be approaching a breakup point.

UNIVMUSIC GRPADR050

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UNIVMUSIC GRPADR050 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, UNIVMUSIC GRPADR050 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chongqing Machinery and UNIVMUSIC GRPADR050

The main advantage of trading using opposite Chongqing Machinery and UNIVMUSIC GRPADR050 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery position performs unexpectedly, UNIVMUSIC GRPADR050 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 UNIVMUSIC GRPADR050 will offset losses from the drop in UNIVMUSIC GRPADR050's long position.

The idea behind Chongqing Machinery Electric and UNIVMUSIC GRPADR050 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.