Correlation Between China National and Monarch Cement
Can any of the company-specific risk be diversified away by investing in both China National and Monarch Cement 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 National and Monarch Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China National Building and The Monarch Cement, you can compare the effects of market volatilities on China National and Monarch Cement 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 National with a short position of Monarch Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of China National and Monarch Cement.
Diversification Opportunities for China National and Monarch Cement
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Monarch is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding China National Building and The Monarch Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monarch Cement and China National 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 National Building are associated (or correlated) with Monarch Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monarch Cement has no effect on the direction of China National i.e., China National and Monarch Cement go up and down completely randomly.
Pair Corralation between China National and Monarch Cement
Assuming the 90 days horizon China National Building is expected to under-perform the Monarch Cement. But the pink sheet apears to be less risky and, when comparing its historical volatility, China National Building is 1.52 times less risky than Monarch Cement. The pink sheet trades about -0.09 of its potential returns per unit of risk. The The Monarch Cement is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 19,300 in The Monarch Cement on August 30, 2024 and sell it today you would earn a total of 2,549 from holding The Monarch Cement or generate 13.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China National Building vs. The Monarch Cement
Performance |
| Timeline |
| China National Building |
| Monarch Cement |
China National and Monarch Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China National and Monarch Cement
The main advantage of trading using opposite China National and Monarch Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China National position performs unexpectedly, Monarch Cement 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 Monarch Cement will offset losses from the drop in Monarch Cement's long position.| China National vs. Anhui Conch Cement | China National vs. Buzzi Unicem SpA | China National vs. Wienerberger Baustoffindustrie | China National vs. Lafargeholcim Ltd ADR |
| Monarch Cement vs. Eagle Materials | Monarch Cement vs. Summit Materials | Monarch Cement vs. Cementos Pacasmayo SAA | Monarch Cement vs. Loma Negra Compania |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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