Correlation Between Great China and U Tech
Can any of the company-specific risk be diversified away by investing in both Great China and U Tech 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 U Tech 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 U Tech Media Corp, you can compare the effects of market volatilities on Great China and U Tech 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 U Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great China and U Tech.
Diversification Opportunities for Great China and U Tech
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Great and 3050 is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Great China Metal and U Tech Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Tech Media 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 U Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Tech Media has no effect on the direction of Great China i.e., Great China and U Tech go up and down completely randomly.
Pair Corralation between Great China and U Tech
Assuming the 90 days trading horizon Great China Metal is expected to under-perform the U Tech. But the stock apears to be less risky and, when comparing its historical volatility, Great China Metal is 5.49 times less risky than U Tech. The stock trades about 0.0 of its potential returns per unit of risk. The U Tech Media Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,720 in U Tech Media Corp on September 2, 2024 and sell it today you would earn a total of 145.00 from holding U Tech Media Corp or generate 8.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 99.79% |
Values | Daily Returns |
Great China Metal vs. U Tech Media Corp
Performance |
Timeline |
Great China Metal |
U Tech Media |
Great China and U Tech Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Great China and U Tech
The main advantage of trading using opposite Great China and U Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great China position performs unexpectedly, U Tech 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 U Tech will offset losses from the drop in U Tech's long position.Great China vs. Basso Industry Corp | Great China vs. Chung Hsin Electric Machinery | Great China vs. TYC Brother Industrial | Great China vs. TECO Electric Machinery |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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