Correlation Between China Metal and Thermaltake Technology
Can any of the company-specific risk be diversified away by investing in both China Metal and Thermaltake Technology 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 Thermaltake Technology 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 Thermaltake Technology Co, you can compare the effects of market volatilities on China Metal and Thermaltake Technology 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 Thermaltake Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and Thermaltake Technology.
Diversification Opportunities for China Metal and Thermaltake Technology
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Thermaltake is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Thermaltake Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermaltake Technology 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 Thermaltake Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermaltake Technology has no effect on the direction of China Metal i.e., China Metal and Thermaltake Technology go up and down completely randomly.
Pair Corralation between China Metal and Thermaltake Technology
Assuming the 90 days trading horizon China Metal Products is expected to under-perform the Thermaltake Technology. But the stock apears to be less risky and, when comparing its historical volatility, China Metal Products is 1.28 times less risky than Thermaltake Technology. The stock trades about -0.16 of its potential returns per unit of risk. The Thermaltake Technology Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 5,070 in Thermaltake Technology Co on September 3, 2024 and sell it today you would lose (1,390) from holding Thermaltake Technology Co or give up 27.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Metal Products vs. Thermaltake Technology Co
Performance |
| Timeline |
| China Metal Products |
| Thermaltake Technology |
China Metal and Thermaltake Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Metal and Thermaltake Technology
The main advantage of trading using opposite China Metal and Thermaltake Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Metal position performs unexpectedly, Thermaltake Technology 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 Thermaltake Technology will offset losses from the drop in Thermaltake Technology's long position.The idea behind China Metal Products and Thermaltake Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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