Correlation Between China Carbon and Focus Graphite
Can any of the company-specific risk be diversified away by investing in both China Carbon and Focus Graphite 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 China Carbon and Focus Graphite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Carbon Graphit and Focus Graphite, you can compare the effects of market volatilities on China Carbon and Focus Graphite 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 China Carbon with a short position of Focus Graphite. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Carbon and Focus Graphite.
Diversification Opportunities for China Carbon and Focus Graphite
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Focus is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Carbon Graphit and Focus Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Graphite and China Carbon 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 China Carbon Graphit are associated (or correlated) with Focus Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Graphite has no effect on the direction of China Carbon i.e., China Carbon and Focus Graphite go up and down completely randomly.
Pair Corralation between China Carbon and Focus Graphite
Given the investment horizon of 90 days China Carbon Graphit is expected to generate 1.5 times more return on investment than Focus Graphite. However, China Carbon is 1.5 times more volatile than Focus Graphite. It trades about 0.02 of its potential returns per unit of risk. Focus Graphite is currently generating about -0.01 per unit of risk. If you would invest 0.03 in China Carbon Graphit on September 3, 2024 and sell it today you would lose (0.02) from holding China Carbon Graphit or give up 66.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
China Carbon Graphit vs. Focus Graphite
Performance |
| Timeline |
| China Carbon Graphit |
| Focus Graphite |
China Carbon and Focus Graphite Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Carbon and Focus Graphite
The main advantage of trading using opposite China Carbon and Focus Graphite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Carbon position performs unexpectedly, Focus Graphite 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 Focus Graphite will offset losses from the drop in Focus Graphite's long position.| China Carbon vs. Focus Graphite | China Carbon vs. China Power Equipment | China Carbon vs. China Sun Grp | China Carbon vs. Northern Graphite |
| Focus Graphite vs. Advantage Solutions | Focus Graphite vs. Atlas Corp | Focus Graphite vs. PureCycle Technologies | Focus Graphite vs. WM Technology |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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