Correlation Between China Metal and Camellia Metal

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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

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between China and Camellia is -0.18. 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 generate 1.15 times more return on investment than Camellia Metal. However, China Metal is 1.15 times more volatile than Camellia Metal Co. It trades about 0.32 of its potential returns per unit of risk. Camellia Metal Co is currently generating about 0.11 per unit of risk. If you would invest  3,030  in China Metal Products on November 28, 2024 and sell it today you would earn a total of  220.00  from holding China Metal Products or generate 7.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

China Metal Products  vs.  Camellia Metal Co

 Performance 
       Timeline  
China Metal Products 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days China Metal Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China Metal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Camellia Metal 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Camellia Metal Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Camellia Metal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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