Correlation Between China Metal and Camellia Metal
Can any of the company-specific risk be diversified away by investing in both China Metal and Camellia Metal 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 Camellia Metal 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 Camellia Metal Co, you can compare the effects of market volatilities on China Metal and Camellia Metal 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 Camellia Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and Camellia Metal.
Diversification Opportunities for China Metal and Camellia Metal
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Camellia is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Camellia Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Camellia Metal 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 Camellia Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Camellia Metal has no effect on the direction of China Metal i.e., China Metal and Camellia Metal go up and down completely randomly.
Pair Corralation between China Metal and Camellia Metal
Assuming the 90 days trading horizon China Metal Products is expected to under-perform the Camellia Metal. But the stock apears to be less risky and, when comparing its historical volatility, China Metal Products is 1.01 times less risky than Camellia Metal. The stock trades about -0.15 of its potential returns per unit of risk. The Camellia Metal Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,490 in Camellia Metal Co on November 3, 2024 and sell it today you would earn a total of 0.00 from holding Camellia Metal Co or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Metal Products vs. Camellia Metal Co
Performance |
| Timeline |
| China Metal Products |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Camellia Metal |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Metal and Camellia Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Metal and Camellia Metal
The main advantage of trading using opposite China Metal and Camellia Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Metal position performs unexpectedly, Camellia Metal 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 Camellia Metal will offset losses from the drop in Camellia Metal's long position.The idea behind China Metal Products and Camellia Metal 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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