Correlation Between China Natural and Fuel Tech
Can any of the company-specific risk be diversified away by investing in both China Natural and Fuel 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 Fuel 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 Fuel Tech, you can compare the effects of market volatilities on China Natural and Fuel 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 Fuel Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Natural and Fuel Tech.
Diversification Opportunities for China Natural and Fuel Tech
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Fuel is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Natural Resources and Fuel Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuel Tech 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 Fuel Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuel Tech has no effect on the direction of China Natural i.e., China Natural and Fuel Tech go up and down completely randomly.
Pair Corralation between China Natural and Fuel Tech
Given the investment horizon of 90 days China Natural Resources is expected to generate 7.5 times more return on investment than Fuel Tech. However, China Natural is 7.5 times more volatile than Fuel Tech. It trades about 0.02 of its potential returns per unit of risk. Fuel Tech is currently generating about 0.01 per unit of risk. If you would invest 168.00 in China Natural Resources on September 12, 2024 and sell it today you would lose (105.00) from holding China Natural Resources or give up 62.5% 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. Fuel Tech
Performance |
| Timeline |
| China Natural Resources |
| Fuel Tech |
China Natural and Fuel Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Natural and Fuel Tech
The main advantage of trading using opposite China Natural and Fuel Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Natural position performs unexpectedly, Fuel 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 Fuel Tech will offset losses from the drop in Fuel Tech's long position.| China Natural vs. Seychelle Environmtl | China Natural vs. Vow ASA | China Natural vs. Eestech | China Natural vs. Energy and Water |
| Fuel Tech vs. Federal Signal | Fuel Tech vs. CECO Environmental Corp | Fuel Tech vs. Zurn Elkay Water | Fuel Tech vs. Greenlane Renewables |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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