Correlation Between WATSCO INC and CHINA HUARONG
Can any of the company-specific risk be diversified away by investing in both WATSCO INC and CHINA HUARONG 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 WATSCO INC and CHINA HUARONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WATSCO INC B and CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on WATSCO INC and CHINA HUARONG 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 WATSCO INC with a short position of CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of WATSCO INC and CHINA HUARONG.
Diversification Opportunities for WATSCO INC and CHINA HUARONG
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WATSCO and CHINA is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding WATSCO INC B and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD and WATSCO INC 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 WATSCO INC B are associated (or correlated) with CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of WATSCO INC i.e., WATSCO INC and CHINA HUARONG go up and down completely randomly.
Pair Corralation between WATSCO INC and CHINA HUARONG
Assuming the 90 days trading horizon WATSCO INC is expected to generate 83.71 times less return on investment than CHINA HUARONG. But when comparing it to its historical volatility, WATSCO INC B is 22.07 times less risky than CHINA HUARONG. It trades about 0.03 of its potential returns per unit of risk. CHINA HUARONG ENERHD 50 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 0.05 in CHINA HUARONG ENERHD 50 on September 12, 2024 and sell it today you would earn a total of 0.10 from holding CHINA HUARONG ENERHD 50 or generate 200.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WATSCO INC B vs. CHINA HUARONG ENERHD 50
Performance |
| Timeline |
| WATSCO INC B |
| CHINA HUARONG ENERHD |
WATSCO INC and CHINA HUARONG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WATSCO INC and CHINA HUARONG
The main advantage of trading using opposite WATSCO INC and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WATSCO INC position performs unexpectedly, CHINA HUARONG 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 HUARONG will offset losses from the drop in CHINA HUARONG's long position.| WATSCO INC vs. GEAR4MUSIC LS 10 | WATSCO INC vs. Astral Foods Limited | WATSCO INC vs. Tyson Foods | WATSCO INC vs. PT Indofood Sukses |
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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