Correlation Between China Natural and Eestech

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

By analyzing existing cross correlation between China Natural Resources and Eestech, you can compare the effects of market volatilities on China Natural and Eestech 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 Natural with a short position of Eestech. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Natural and Eestech.

Diversification Opportunities for China Natural and Eestech

-0.16

Correlation Coefficient

China Natural  Eestech

Good diversification

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

Pair Corralation between China Natural and Eestech

If you would invest  0.04  in Eestech on September 20, 2024 and sell it today you would earn a total of  0.00  from holding Eestech or generate 0.0% return on investment over 90 days.

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

China Natural Resources  vs.  Eestech

China Natural Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Natural Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, China Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Eestech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eestech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with China Natural and Eestech

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

The idea behind China Natural Resources and Eestech 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.