Correlation Between Great China and Ability Enterprise
Can any of the company-specific risk be diversified away by investing in both Great China and Ability Enterprise 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 Great China and Ability Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great China Metal and Ability Enterprise Co, you can compare the effects of market volatilities on Great China and Ability Enterprise 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 Great China with a short position of Ability Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great China and Ability Enterprise.
Diversification Opportunities for Great China and Ability Enterprise
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Great and Ability is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Great China Metal and Ability Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ability Enterprise and Great China 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 Great China Metal are associated (or correlated) with Ability Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ability Enterprise has no effect on the direction of Great China i.e., Great China and Ability Enterprise go up and down completely randomly.
Pair Corralation between Great China and Ability Enterprise
Assuming the 90 days trading horizon Great China Metal is expected to under-perform the Ability Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, Great China Metal is 7.33 times less risky than Ability Enterprise. The stock trades about -0.04 of its potential returns per unit of risk. The Ability Enterprise Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,610 in Ability Enterprise Co on September 4, 2024 and sell it today you would earn a total of 2,110 from holding Ability Enterprise Co or generate 80.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great China Metal vs. Ability Enterprise Co
Performance |
| Timeline |
| Great China Metal |
| Ability Enterprise |
Great China and Ability Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great China and Ability Enterprise
The main advantage of trading using opposite Great China and Ability Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great China position performs unexpectedly, Ability Enterprise 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 Ability Enterprise will offset losses from the drop in Ability Enterprise's long position.The idea behind Great China Metal and Ability Enterprise 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.| Ability Enterprise vs. Hannstar Display Corp | Ability Enterprise vs. STL Technology Co | Ability Enterprise vs. Emerging Display Technologies | Ability Enterprise vs. Integrated Service Technology |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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