Correlation Between China Metal and Leatec Fine
Can any of the company-specific risk be diversified away by investing in both China Metal and Leatec Fine 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 Leatec Fine 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 Leatec Fine Ceramics, you can compare the effects of market volatilities on China Metal and Leatec Fine 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 Leatec Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and Leatec Fine.
Diversification Opportunities for China Metal and Leatec Fine
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Leatec is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Leatec Fine Ceramics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leatec Fine Ceramics 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 Leatec Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leatec Fine Ceramics has no effect on the direction of China Metal i.e., China Metal and Leatec Fine go up and down completely randomly.
Pair Corralation between China Metal and Leatec Fine
Assuming the 90 days trading horizon China Metal Products is expected to under-perform the Leatec Fine. But the stock apears to be less risky and, when comparing its historical volatility, China Metal Products is 1.47 times less risky than Leatec Fine. The stock trades about 0.0 of its potential returns per unit of risk. The Leatec Fine Ceramics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,320 in Leatec Fine Ceramics on August 28, 2024 and sell it today you would earn a total of 570.00 from holding Leatec Fine Ceramics or generate 24.57% 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. Leatec Fine Ceramics
Performance |
| Timeline |
| China Metal Products |
| Leatec Fine Ceramics |
China Metal and Leatec Fine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Metal and Leatec Fine
The main advantage of trading using opposite China Metal and Leatec Fine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Metal position performs unexpectedly, Leatec Fine 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 Leatec Fine will offset losses from the drop in Leatec Fine's long position.| China Metal vs. Basso Industry Corp | China Metal vs. Chung Hsin Electric Machinery | China Metal vs. TYC Brother Industrial | China Metal vs. TECO Electric Machinery |
| Leatec Fine vs. Global Unichip Corp | Leatec Fine vs. Asmedia Technology | Leatec Fine vs. Unimicron Technology Corp | Leatec Fine vs. Novatek Microelectronics Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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