Correlation Between Chongqing Machinery and American States
Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery and American States 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 American States 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 American States Water, you can compare the effects of market volatilities on Chongqing Machinery and American States 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 American States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and American States.
Diversification Opportunities for Chongqing Machinery and American States
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chongqing and American is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water 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 American States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and American States go up and down completely randomly.
Pair Corralation between Chongqing Machinery and American States
Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 3.88 times more return on investment than American States. However, Chongqing Machinery is 3.88 times more volatile than American States Water. It trades about 0.09 of its potential returns per unit of risk. American States Water is currently generating about 0.11 per unit of risk. If you would invest 4.70 in Chongqing Machinery Electric on September 1, 2024 and sell it today you would earn a total of 2.65 from holding Chongqing Machinery Electric or generate 56.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.24% |
| Values | Daily Returns |
Chongqing Machinery Electric vs. American States Water
Performance |
| Timeline |
| Chongqing Machinery |
| American States Water |
Chongqing Machinery and American States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Machinery and American States
The main advantage of trading using opposite Chongqing Machinery and American States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery position performs unexpectedly, American States 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 American States will offset losses from the drop in American States' long position.| Chongqing Machinery vs. ABB | Chongqing Machinery vs. Emerson Electric Co | Chongqing Machinery vs. Superior Plus Corp | Chongqing Machinery vs. NMI Holdings |
| American States vs. MYFAIR GOLD P | American States vs. Calibre Mining Corp | American States vs. DELTA AIR LINES | American States vs. VIVA WINE GROUP |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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