Correlation Between China State and Weichai Heavy
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By analyzing existing cross correlation between China State Construction and Weichai Heavy Machinery, you can compare the effects of market volatilities on China State and Weichai Heavy 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 State with a short position of Weichai Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of China State and Weichai Heavy.
Diversification Opportunities for China State and Weichai Heavy
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Weichai is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding China State Construction and Weichai Heavy Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weichai Heavy Machinery and China State 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 State Construction are associated (or correlated) with Weichai Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weichai Heavy Machinery has no effect on the direction of China State i.e., China State and Weichai Heavy go up and down completely randomly.
Pair Corralation between China State and Weichai Heavy
Assuming the 90 days trading horizon China State is expected to generate 3.3 times less return on investment than Weichai Heavy. But when comparing it to its historical volatility, China State Construction is 1.77 times less risky than Weichai Heavy. It trades about 0.02 of its potential returns per unit of risk. Weichai Heavy Machinery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,075 in Weichai Heavy Machinery on August 30, 2024 and sell it today you would earn a total of 166.00 from holding Weichai Heavy Machinery or generate 15.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China State Construction vs. Weichai Heavy Machinery
Performance |
| Timeline |
| China State Construction |
| Weichai Heavy Machinery |
China State and Weichai Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China State and Weichai Heavy
The main advantage of trading using opposite China State and Weichai Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China State position performs unexpectedly, Weichai Heavy 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 Weichai Heavy will offset losses from the drop in Weichai Heavy's long position.| China State vs. Shenyang Chemical Industry | China State vs. Lianhe Chemical Technology | China State vs. North Huajin Chemical | China State vs. Maoming Petro Chemical Shihua |
| Weichai Heavy vs. PetroChina Co Ltd | Weichai Heavy vs. China State Construction | Weichai Heavy vs. China Mobile Limited | Weichai Heavy vs. Industrial and Commercial |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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