Correlation Between China Metal and Great Computer
Can any of the company-specific risk be diversified away by investing in both China Metal and Great Computer 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 Great Computer 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 Great Computer, you can compare the effects of market volatilities on China Metal and Great Computer 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 Great Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and Great Computer.
Diversification Opportunities for China Metal and Great Computer
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Great is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Great Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Computer 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 Great Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Computer has no effect on the direction of China Metal i.e., China Metal and Great Computer go up and down completely randomly.
Pair Corralation between China Metal and Great Computer
Assuming the 90 days trading horizon China Metal is expected to generate 48.82 times less return on investment than Great Computer. But when comparing it to its historical volatility, China Metal Products is 26.96 times less risky than Great Computer. It trades about 0.02 of its potential returns per unit of risk. Great Computer is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,240 in Great Computer on September 3, 2024 and sell it today you would earn a total of 760.00 from holding Great Computer or generate 61.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Metal Products vs. Great Computer
Performance |
| Timeline |
| China Metal Products |
| Great Computer |
China Metal and Great Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Metal and Great Computer
The main advantage of trading using opposite China Metal and Great Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Metal position performs unexpectedly, Great Computer 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 Great Computer will offset losses from the drop in Great Computer's long position.The idea behind China Metal Products and Great Computer 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.| Great Computer vs. Airtac International Group | Great Computer vs. TECO Electric Machinery | Great Computer vs. Chung Hsin Electric Machinery | Great Computer vs. Ruentex Development Co |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |