Correlation Between China Bills and Newmax Technology
Can any of the company-specific risk be diversified away by investing in both China Bills and Newmax 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 Bills and Newmax Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Bills Finance and Newmax Technology Co, you can compare the effects of market volatilities on China Bills and Newmax 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 Bills with a short position of Newmax Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Bills and Newmax Technology.
Diversification Opportunities for China Bills and Newmax Technology
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Newmax is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding China Bills Finance and Newmax Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmax Technology and China Bills 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 Bills Finance are associated (or correlated) with Newmax Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmax Technology has no effect on the direction of China Bills i.e., China Bills and Newmax Technology go up and down completely randomly.
Pair Corralation between China Bills and Newmax Technology
Assuming the 90 days trading horizon China Bills Finance is expected to generate 0.13 times more return on investment than Newmax Technology. However, China Bills Finance is 7.44 times less risky than Newmax Technology. It trades about 0.01 of its potential returns per unit of risk. Newmax Technology Co is currently generating about -0.02 per unit of risk. If you would invest 1,500 in China Bills Finance on November 2, 2024 and sell it today you would earn a total of 5.00 from holding China Bills Finance or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Bills Finance vs. Newmax Technology Co
Performance |
| Timeline |
| China Bills Finance |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Newmax Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
China Bills and Newmax Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Bills and Newmax Technology
The main advantage of trading using opposite China Bills and Newmax Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Bills position performs unexpectedly, Newmax 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 Newmax Technology will offset losses from the drop in Newmax Technology's long position.The idea behind China Bills Finance and Newmax 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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