Correlation Between Weichai Power and Ametek

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

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

Diversification Opportunities for Weichai Power and Ametek

-0.2

Correlation Coefficient

Weichai Power  Ametek

Good diversification

The 3 months correlation between Weichai and Ametek is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Weichai Power and Ametek Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ametek Inc and Weichai Power 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 Weichai Power are associated (or correlated) with Ametek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ametek Inc has no effect on the direction of Weichai Power i.e., Weichai Power and Ametek go up and down completely randomly.

Pair Corralation between Weichai Power and Ametek

If you would invest  16,487  in Ametek Inc on September 5, 2024 and sell it today you would earn a total of  2,946  from holding Ametek Inc or generate 17.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Weichai Power  vs.  Ametek Inc

Weichai Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weichai Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Weichai Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ametek Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ametek Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Ametek exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Weichai Power and Ametek

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

The idea behind Weichai Power and Ametek Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.