Correlation Between Chongqing Machinery and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery and Nippon Steel 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 Nippon Steel 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 Nippon Steel, you can compare the effects of market volatilities on Chongqing Machinery and Nippon Steel 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 Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and Nippon Steel.
Diversification Opportunities for Chongqing Machinery and Nippon Steel
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chongqing and Nippon is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and Nippon Steel go up and down completely randomly.
Pair Corralation between Chongqing Machinery and Nippon Steel
Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 3.54 times more return on investment than Nippon Steel. However, Chongqing Machinery is 3.54 times more volatile than Nippon Steel. It trades about 0.07 of its potential returns per unit of risk. Nippon Steel is currently generating about 0.01 per unit of risk. If you would invest 2.37 in Chongqing Machinery Electric on September 1, 2024 and sell it today you would earn a total of 4.98 from holding Chongqing Machinery Electric or generate 210.13% 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. Nippon Steel
Performance |
| Timeline |
| Chongqing Machinery |
| Nippon Steel |
Chongqing Machinery and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Machinery and Nippon Steel
The main advantage of trading using opposite Chongqing Machinery and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery position performs unexpectedly, Nippon Steel 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 Nippon Steel will offset losses from the drop in Nippon Steel's long position.| Chongqing Machinery vs. ABB | Chongqing Machinery vs. Emerson Electric Co | Chongqing Machinery vs. Superior Plus Corp | Chongqing Machinery vs. NMI Holdings |
| Nippon Steel vs. COSMOSTEEL HLDGS | Nippon Steel vs. LEGACY IRON ORE | Nippon Steel vs. BlueScope Steel Limited | Nippon Steel vs. Daido Steel Co |
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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