Correlation Between China Metal and Loop Telecommunicatio
Can any of the company-specific risk be diversified away by investing in both China Metal and Loop Telecommunicatio 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 Loop Telecommunicatio 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 Loop Telecommunication International, you can compare the effects of market volatilities on China Metal and Loop Telecommunicatio 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 Loop Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and Loop Telecommunicatio.
Diversification Opportunities for China Metal and Loop Telecommunicatio
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Loop is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Loop Telecommunication Interna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loop Telecommunication 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 Loop Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loop Telecommunication has no effect on the direction of China Metal i.e., China Metal and Loop Telecommunicatio go up and down completely randomly.
Pair Corralation between China Metal and Loop Telecommunicatio
Assuming the 90 days trading horizon China Metal is expected to generate 7.94 times less return on investment than Loop Telecommunicatio. But when comparing it to its historical volatility, China Metal Products is 2.13 times less risky than Loop Telecommunicatio. It trades about 0.02 of its potential returns per unit of risk. Loop Telecommunication International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,120 in Loop Telecommunication International on September 3, 2024 and sell it today you would earn a total of 5,370 from holding Loop Telecommunication International or generate 253.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Metal Products vs. Loop Telecommunication Interna
Performance |
| Timeline |
| China Metal Products |
| Loop Telecommunication |
China Metal and Loop Telecommunicatio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Metal and Loop Telecommunicatio
The main advantage of trading using opposite China Metal and Loop Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Metal position performs unexpectedly, Loop Telecommunicatio 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 Loop Telecommunicatio will offset losses from the drop in Loop Telecommunicatio's long position.The idea behind China Metal Products and Loop Telecommunication International 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.| Loop Telecommunicatio vs. Taiwan Semiconductor Manufacturing | Loop Telecommunicatio vs. Yang Ming Marine | Loop Telecommunicatio vs. ASE Industrial Holding | Loop Telecommunicatio vs. AU Optronics |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |