Correlation Between China Natural and LiqTech International

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

Diversification Opportunities for China Natural and LiqTech International

0.22

Correlation Coefficient

China Natural  LiqTech International

Modest diversification

The 3 months correlation between China and LiqTech is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding China Natural Resources and LiqTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LiqTech International 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 LiqTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LiqTech International has no effect on the direction of China Natural i.e., China Natural and LiqTech International go up and down completely randomly.

Pair Corralation between China Natural and LiqTech International

Given the investment horizon of 90 days China Natural Resources is expected to generate 1.46 times more return on investment than LiqTech International. However, China Natural is 1.46 times more volatile than LiqTech International. It trades about 0.02 of its potential returns per unit of risk. LiqTech International is currently generating about -0.14 per unit of risk. If you would invest  61.00  in China Natural Resources on September 22, 2024 and sell it today you would lose (5.00) from holding China Natural Resources or give up 8.2% of portfolio value over 90 days.

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

China Natural Resources  vs.  LiqTech International

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.

LiqTech International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LiqTech International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with China Natural and LiqTech International

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

The idea behind China Natural Resources and LiqTech International 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.