Correlation Between China Metal and SuperAlloy Industrial
Can any of the company-specific risk be diversified away by investing in both China Metal and SuperAlloy Industrial 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 Metal and SuperAlloy Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Metal Products and SuperAlloy Industrial Co,, you can compare the effects of market volatilities on China Metal and SuperAlloy Industrial 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 Metal with a short position of SuperAlloy Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and SuperAlloy Industrial.
Diversification Opportunities for China Metal and SuperAlloy Industrial
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and SuperAlloy is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and SuperAlloy Industrial Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SuperAlloy Industrial Co, and China Metal 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 Metal Products are associated (or correlated) with SuperAlloy Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SuperAlloy Industrial Co, has no effect on the direction of China Metal i.e., China Metal and SuperAlloy Industrial go up and down completely randomly.
Pair Corralation between China Metal and SuperAlloy Industrial
Assuming the 90 days trading horizon China Metal Products is expected to under-perform the SuperAlloy Industrial. But the stock apears to be less risky and, when comparing its historical volatility, China Metal Products is 1.06 times less risky than SuperAlloy Industrial. The stock trades about 0.0 of its potential returns per unit of risk. The SuperAlloy Industrial Co, is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 6,103 in SuperAlloy Industrial Co, on September 4, 2024 and sell it today you would lose (103.00) from holding SuperAlloy Industrial Co, or give up 1.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Metal Products vs. SuperAlloy Industrial Co,
Performance |
| Timeline |
| China Metal Products |
| SuperAlloy Industrial Co, |
China Metal and SuperAlloy Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Metal and SuperAlloy Industrial
The main advantage of trading using opposite China Metal and SuperAlloy Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Metal position performs unexpectedly, SuperAlloy Industrial 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 SuperAlloy Industrial will offset losses from the drop in SuperAlloy Industrial's long position.The idea behind China Metal Products and SuperAlloy Industrial Co, 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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