Correlation Between Chongqing Machinery and Nufarm
Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery and Nufarm 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 Nufarm 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 Nufarm Limited, you can compare the effects of market volatilities on Chongqing Machinery and Nufarm 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 Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and Nufarm.
Diversification Opportunities for Chongqing Machinery and Nufarm
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Chongqing and Nufarm is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited 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 Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and Nufarm go up and down completely randomly.
Pair Corralation between Chongqing Machinery and Nufarm
Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 3.38 times more return on investment than Nufarm. However, Chongqing Machinery is 3.38 times more volatile than Nufarm Limited. It trades about 0.07 of its potential returns per unit of risk. Nufarm Limited is currently generating about -0.03 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 Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chongqing Machinery Electric vs. Nufarm Limited
Performance |
| Timeline |
| Chongqing Machinery |
| Nufarm Limited |
Chongqing Machinery and Nufarm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Machinery and Nufarm
The main advantage of trading using opposite Chongqing Machinery and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery position performs unexpectedly, Nufarm 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 Nufarm will offset losses from the drop in Nufarm's long position.| Chongqing Machinery vs. ABB | Chongqing Machinery vs. Emerson Electric Co | Chongqing Machinery vs. Superior Plus Corp | Chongqing Machinery vs. NMI Holdings |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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