Correlation Between MYR and China State
Can any of the company-specific risk be diversified away by investing in both MYR and China State 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 MYR and China State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MYR Group and China State Construction, you can compare the effects of market volatilities on MYR and China State 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 MYR with a short position of China State. Check out your portfolio center. Please also check ongoing floating volatility patterns of MYR and China State.
Diversification Opportunities for MYR and China State
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MYR and China is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding MYR Group and China State Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China State Construction and MYR 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 MYR Group are associated (or correlated) with China State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China State Construction has no effect on the direction of MYR i.e., MYR and China State go up and down completely randomly.
Pair Corralation between MYR and China State
Given the investment horizon of 90 days MYR Group is expected to generate 0.66 times more return on investment than China State. However, MYR Group is 1.51 times less risky than China State. It trades about 0.4 of its potential returns per unit of risk. China State Construction is currently generating about -0.22 per unit of risk. If you would invest 11,676 in MYR Group on August 28, 2024 and sell it today you would earn a total of 4,291 from holding MYR Group or generate 36.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MYR Group vs. China State Construction
Performance |
| Timeline |
| MYR Group |
| China State Construction |
MYR and China State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MYR and China State
The main advantage of trading using opposite MYR and China State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MYR position performs unexpectedly, China State 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 China State will offset losses from the drop in China State's long position.The idea behind MYR Group and China State Construction pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| China State vs. Aecom Technology | China State vs. Matrix Service Co | China State vs. MYR Group | China State vs. Fluor |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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