Correlation Between Chongqing Machinery and Seven West
Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery and Seven West 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 Seven West 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 Seven West Media, you can compare the effects of market volatilities on Chongqing Machinery and Seven West 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 Seven West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and Seven West.
Diversification Opportunities for Chongqing Machinery and Seven West
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chongqing and Seven is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Seven West Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seven West Media 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 Seven West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seven West Media has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and Seven West go up and down completely randomly.
Pair Corralation between Chongqing Machinery and Seven West
Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 0.64 times more return on investment than Seven West. However, Chongqing Machinery Electric is 1.56 times less risky than Seven West. It trades about 0.05 of its potential returns per unit of risk. Seven West Media is currently generating about -0.02 per unit of risk. If you would invest 7.20 in Chongqing Machinery Electric on September 1, 2024 and sell it today you would earn a total of 0.15 from holding Chongqing Machinery Electric or generate 2.08% 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. Seven West Media
Performance |
| Timeline |
| Chongqing Machinery |
| Seven West Media |
Chongqing Machinery and Seven West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Machinery and Seven West
The main advantage of trading using opposite Chongqing Machinery and Seven West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery position performs unexpectedly, Seven West 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 Seven West will offset losses from the drop in Seven West's long position.| Chongqing Machinery vs. ABB | Chongqing Machinery vs. Emerson Electric Co | Chongqing Machinery vs. Superior Plus Corp | Chongqing Machinery vs. NMI Holdings |
| Seven West vs. Live Nation Entertainment | Seven West vs. Fuji Media Holdings | Seven West vs. Rai Way SpA | Seven West vs. Superior Plus Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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