Correlation Between China Metal and Group Up
Can any of the company-specific risk be diversified away by investing in both China Metal and Group Up 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 Group Up 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 Group Up Industrial, you can compare the effects of market volatilities on China Metal and Group Up 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 Group Up. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and Group Up.
Diversification Opportunities for China Metal and Group Up
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Group is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Group Up Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group Up Industrial 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 Group Up. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group Up Industrial has no effect on the direction of China Metal i.e., China Metal and Group Up go up and down completely randomly.
Pair Corralation between China Metal and Group Up
Assuming the 90 days trading horizon China Metal is expected to generate 1.08 times less return on investment than Group Up. But when comparing it to its historical volatility, China Metal Products is 1.33 times less risky than Group Up. It trades about 0.32 of its potential returns per unit of risk. Group Up Industrial is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 21,950 in Group Up Industrial on November 28, 2024 and sell it today you would earn a total of 1,700 from holding Group Up Industrial or generate 7.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Metal Products vs. Group Up Industrial
Performance |
| Timeline |
| China Metal Products |
| Group Up Industrial |
China Metal and Group Up Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Metal and Group Up
The main advantage of trading using opposite China Metal and Group Up positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Metal position performs unexpectedly, Group Up 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 Group Up will offset losses from the drop in Group Up'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 |
| Group Up vs. First Copper Technology | Group Up vs. Oceanic Beverages Co | Group Up vs. Asia Metal Industries | Group Up vs. Chernan Metal Industrial |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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