Correlation Between CN MODERN and China BlueChemical
Can any of the company-specific risk be diversified away by investing in both CN MODERN and China BlueChemical 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 CN MODERN and China BlueChemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN MODERN DAIRY and China BlueChemical, you can compare the effects of market volatilities on CN MODERN and China BlueChemical 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 CN MODERN with a short position of China BlueChemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and China BlueChemical.
Diversification Opportunities for CN MODERN and China BlueChemical
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 07M and China is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of CN MODERN i.e., CN MODERN and China BlueChemical go up and down completely randomly.
Pair Corralation between CN MODERN and China BlueChemical
Assuming the 90 days trading horizon CN MODERN DAIRY is expected to under-perform the China BlueChemical. But the stock apears to be less risky and, when comparing its historical volatility, CN MODERN DAIRY is 1.8 times less risky than China BlueChemical. The stock trades about -0.19 of its potential returns per unit of risk. The China BlueChemical is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 24.00 in China BlueChemical on August 28, 2024 and sell it today you would lose (1.00) from holding China BlueChemical or give up 4.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
CN MODERN DAIRY vs. China BlueChemical
Performance |
| Timeline |
| CN MODERN DAIRY |
| China BlueChemical |
CN MODERN and China BlueChemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CN MODERN and China BlueChemical
The main advantage of trading using opposite CN MODERN and China BlueChemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN position performs unexpectedly, China BlueChemical 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 BlueChemical will offset losses from the drop in China BlueChemical's long position.The idea behind CN MODERN DAIRY and China BlueChemical 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.| China BlueChemical vs. CONAGRA FOODS | China BlueChemical vs. Clean Energy Fuels | China BlueChemical vs. Lifeway Foods | China BlueChemical vs. Austevoll Seafood ASA |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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