Correlation Between Chongqing Machinery and Globex Mining
Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery and Globex Mining 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 Globex Mining 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 Globex Mining Enterprises, you can compare the effects of market volatilities on Chongqing Machinery and Globex Mining 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 Globex Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and Globex Mining.
Diversification Opportunities for Chongqing Machinery and Globex Mining
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chongqing and Globex is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Globex Mining Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globex Mining Enterprises 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 Globex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globex Mining Enterprises has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and Globex Mining go up and down completely randomly.
Pair Corralation between Chongqing Machinery and Globex Mining
Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 1.97 times more return on investment than Globex Mining. However, Chongqing Machinery is 1.97 times more volatile than Globex Mining Enterprises. It trades about 0.07 of its potential returns per unit of risk. Globex Mining Enterprises is currently generating about 0.05 per unit of risk. If you would invest 2.13 in Chongqing Machinery Electric on September 5, 2024 and sell it today you would earn a total of 5.57 from holding Chongqing Machinery Electric or generate 261.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chongqing Machinery Electric vs. Globex Mining Enterprises
Performance |
| Timeline |
| Chongqing Machinery |
| Globex Mining Enterprises |
Chongqing Machinery and Globex Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Machinery and Globex Mining
The main advantage of trading using opposite Chongqing Machinery and Globex Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery position performs unexpectedly, Globex Mining 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 Globex Mining will offset losses from the drop in Globex Mining's long position.| Chongqing Machinery vs. Schneider Electric SE | Chongqing Machinery vs. Emerson Electric Co | Chongqing Machinery vs. Parker Hannifin |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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