Correlation Between China BlueChemical and Cleanaway Waste

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

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

Diversification Opportunities for China BlueChemical and Cleanaway Waste

0.41

Correlation Coefficient

China BlueChemical  Cleanaway Waste

Very weak diversification

The 3 months correlation between China and Cleanaway is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and Cleanaway Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleanaway Waste Mana and China BlueChemical 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 BlueChemical are associated (or correlated) with Cleanaway Waste. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleanaway Waste Mana has no effect on the direction of China BlueChemical i.e., China BlueChemical and Cleanaway Waste go up and down completely randomly.

Pair Corralation between China BlueChemical and Cleanaway Waste

Assuming the 90 days horizon China BlueChemical is expected to generate 1.67 times more return on investment than Cleanaway Waste. However, China BlueChemical is 1.67 times more volatile than Cleanaway Waste Management. It trades about 0.08 of its potential returns per unit of risk. Cleanaway Waste Management is currently generating about 0.05 per unit of risk. If you would invest  21.00  in China BlueChemical on September 4, 2024 and sell it today you would earn a total of  3.00  from holding China BlueChemical or generate 14.29% return on investment over 90 days.

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

China BlueChemical  vs.  Cleanaway Waste Management

China BlueChemical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China BlueChemical reported solid returns over the last few months and may actually be approaching a breakup point.

Cleanaway Waste Mana

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with China BlueChemical and Cleanaway Waste

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

The idea behind China BlueChemical and Cleanaway Waste Management 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.