Correlation Between Weichai Power and Cummins
Can any of the company-specific risk be diversified away by investing in both Weichai Power and Cummins 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 Weichai Power and Cummins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weichai Power and Cummins, you can compare the effects of market volatilities on Weichai Power and Cummins 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 Weichai Power with a short position of Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weichai Power and Cummins.
Diversification Opportunities for Weichai Power and Cummins
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Weichai and Cummins is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Weichai Power and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins and Weichai Power 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 Weichai Power are associated (or correlated) with Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Weichai Power i.e., Weichai Power and Cummins go up and down completely randomly.
Pair Corralation between Weichai Power and Cummins
If you would invest 33,301 in Cummins on August 27, 2024 and sell it today you would earn a total of 4,226 from holding Cummins or generate 12.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Weichai Power vs. Cummins
Performance |
| Timeline |
| Weichai Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Cummins |
Weichai Power and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weichai Power and Cummins
The main advantage of trading using opposite Weichai Power and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weichai Power position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| Weichai Power vs. Shanghai Electric Group | Weichai Power vs. Xinjiang Goldwind Science | Weichai Power vs. Nordson | Weichai Power vs. CVD Equipment |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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