Correlation Between Chongqing Machinery and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery and Sumitomo Mitsui 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 Chongqing Machinery and Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chongqing Machinery Electric and Sumitomo Mitsui Construction, you can compare the effects of market volatilities on Chongqing Machinery and Sumitomo Mitsui 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 Chongqing Machinery with a short position of Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and Sumitomo Mitsui.
Diversification Opportunities for Chongqing Machinery and Sumitomo Mitsui
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Chongqing and Sumitomo is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Sumitomo Mitsui Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Cons and Chongqing Machinery 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 Chongqing Machinery Electric are associated (or correlated) with Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Cons has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between Chongqing Machinery and Sumitomo Mitsui
Assuming the 90 days horizon Chongqing Machinery is expected to generate 1.84 times less return on investment than Sumitomo Mitsui. In addition to that, Chongqing Machinery is 1.11 times more volatile than Sumitomo Mitsui Construction. It trades about 0.05 of its total potential returns per unit of risk. Sumitomo Mitsui Construction is currently generating about 0.11 per unit of volatility. If you would invest 230.00 in Sumitomo Mitsui Construction on September 1, 2024 and sell it today you would earn a total of 10.00 from holding Sumitomo Mitsui Construction or generate 4.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chongqing Machinery Electric vs. Sumitomo Mitsui Construction
Performance |
| Timeline |
| Chongqing Machinery |
| Sumitomo Mitsui Cons |
Chongqing Machinery and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Machinery and Sumitomo Mitsui
The main advantage of trading using opposite Chongqing Machinery and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery position performs unexpectedly, Sumitomo Mitsui 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 Sumitomo Mitsui will offset losses from the drop in Sumitomo Mitsui's long position.| Chongqing Machinery vs. ABB | Chongqing Machinery vs. Emerson Electric Co | Chongqing Machinery vs. Superior Plus Corp | Chongqing Machinery vs. NMI Holdings |
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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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