Correlation Between Matrix Service and China Railway

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

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

Diversification Opportunities for Matrix Service and China Railway

0.26

Correlation Coefficient

Matrix Service  China Railway

Modest diversification

The 3 months correlation between Matrix and China is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Matrix Service Co and China Railway Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Group and Matrix Service 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 Matrix Service Co are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Group has no effect on the direction of Matrix Service i.e., Matrix Service and China Railway go up and down completely randomly.

Pair Corralation between Matrix Service and China Railway

Given the investment horizon of 90 days Matrix Service Co is expected to generate 2.73 times more return on investment than China Railway. However, Matrix Service is 2.73 times more volatile than China Railway Group. It trades about 0.23 of its potential returns per unit of risk. China Railway Group is currently generating about 0.01 per unit of risk. If you would invest  1,114  in Matrix Service Co on September 4, 2024 and sell it today you would earn a total of  195.00  from holding Matrix Service Co or generate 17.5% return on investment over 90 days.

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

Matrix Service Co  vs.  China Railway Group

Matrix Service

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Matrix Service Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Matrix Service showed solid returns over the last few months and may actually be approaching a breakup point.

China Railway Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Railway Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Railway reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matrix Service and China Railway

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

The idea behind Matrix Service Co and China Railway Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..