Correlation Between China Natural and Delta CleanTech
Can any of the company-specific risk be diversified away by investing in both China Natural and Delta CleanTech 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 Delta CleanTech 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 Delta CleanTech, you can compare the effects of market volatilities on China Natural and Delta CleanTech 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 Delta CleanTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Natural and Delta CleanTech.
Diversification Opportunities for China Natural and Delta CleanTech
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Delta is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding China Natural Resources and Delta CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta CleanTech 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 Delta CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta CleanTech has no effect on the direction of China Natural i.e., China Natural and Delta CleanTech go up and down completely randomly.
Pair Corralation between China Natural and Delta CleanTech
Given the investment horizon of 90 days China Natural Resources is expected to under-perform the Delta CleanTech. But the stock apears to be less risky and, when comparing its historical volatility, China Natural Resources is 2.26 times less risky than Delta CleanTech. The stock trades about -0.02 of its potential returns per unit of risk. The Delta CleanTech is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1.71 in Delta CleanTech on August 27, 2024 and sell it today you would lose (0.27) from holding Delta CleanTech or give up 15.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Natural Resources vs. Delta CleanTech
Performance |
| Timeline |
| China Natural Resources |
| Delta CleanTech |
China Natural and Delta CleanTech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Natural and Delta CleanTech
The main advantage of trading using opposite China Natural and Delta CleanTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Natural position performs unexpectedly, Delta CleanTech 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 Delta CleanTech will offset losses from the drop in Delta CleanTech's long position.| China Natural vs. Seychelle Environmtl | China Natural vs. Vow ASA | China Natural vs. Eestech | China Natural vs. Energy and Water |
| Delta CleanTech vs. TOMI Environmental Solutions | Delta CleanTech vs. Zurn Elkay Water | Delta CleanTech vs. Federal Signal | Delta CleanTech vs. Energy Recovery |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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