Correlation Between Chongqing Machinery and Gold Road
Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery and Gold Road 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 Gold Road 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 Gold Road Resources, you can compare the effects of market volatilities on Chongqing Machinery and Gold Road 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 Gold Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and Gold Road.
Diversification Opportunities for Chongqing Machinery and Gold Road
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chongqing and Gold is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Gold Road Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Road Resources 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 Gold Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Road Resources has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and Gold Road go up and down completely randomly.
Pair Corralation between Chongqing Machinery and Gold Road
Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 0.97 times more return on investment than Gold Road. However, Chongqing Machinery Electric is 1.03 times less risky than Gold Road. It trades about 0.04 of its potential returns per unit of risk. Gold Road Resources is currently generating about 0.01 per unit of risk. If you would invest 7.35 in Chongqing Machinery Electric on August 29, 2024 and sell it today you would earn a total of 0.10 from holding Chongqing Machinery Electric or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Chongqing Machinery Electric vs. Gold Road Resources
Performance |
| Timeline |
| Chongqing Machinery |
| Gold Road Resources |
Chongqing Machinery and Gold Road Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Machinery and Gold Road
The main advantage of trading using opposite Chongqing Machinery and Gold Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery position performs unexpectedly, Gold Road 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 Gold Road will offset losses from the drop in Gold Road's long position.| Chongqing Machinery vs. Gold Road Resources | Chongqing Machinery vs. Texas Roadhouse | Chongqing Machinery vs. EVS Broadcast Equipment | Chongqing Machinery vs. Luckin Coffee |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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