Correlation Between China Natural and Euro Tech
Can any of the company-specific risk be diversified away by investing in both China Natural and Euro Tech 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 Natural and Euro Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Natural Resources and Euro Tech Holdings, you can compare the effects of market volatilities on China Natural and Euro Tech 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 Natural with a short position of Euro Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Natural and Euro Tech.
Diversification Opportunities for China Natural and Euro Tech
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and Euro is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Natural Resources and Euro Tech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euro Tech Holdings and China Natural 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 Natural Resources are associated (or correlated) with Euro Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euro Tech Holdings has no effect on the direction of China Natural i.e., China Natural and Euro Tech go up and down completely randomly.
Pair Corralation between China Natural and Euro Tech
Given the investment horizon of 90 days China Natural Resources is expected to under-perform the Euro Tech. In addition to that, China Natural is 1.74 times more volatile than Euro Tech Holdings. It trades about -0.15 of its total potential returns per unit of risk. Euro Tech Holdings is currently generating about -0.11 per unit of volatility. If you would invest 153.00 in Euro Tech Holdings on August 24, 2024 and sell it today you would lose (8.00) from holding Euro Tech Holdings or give up 5.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Natural Resources vs. Euro Tech Holdings
Performance |
| Timeline |
| China Natural Resources |
| Euro Tech Holdings |
China Natural and Euro Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Natural and Euro Tech
The main advantage of trading using opposite China Natural and Euro Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Natural position performs unexpectedly, Euro Tech 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 Euro Tech will offset losses from the drop in Euro Tech's long position.| China Natural vs. Seychelle Environmtl | China Natural vs. Vow ASA | China Natural vs. Eestech | China Natural vs. Energy and Water |
| Euro Tech vs. LiqTech International | Euro Tech vs. TOMI Environmental Solutions | Euro Tech vs. ClearSign Combustion | Euro Tech vs. Vow ASA |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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