Correlation Between Guocheng Mining and Masterwork Machinery

Can any of the company-specific risk be diversified away by investing in both Guocheng Mining and Masterwork Machinery 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 Guocheng Mining and Masterwork Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guocheng Mining Co and Masterwork Machinery, you can compare the effects of market volatilities on Guocheng Mining and Masterwork Machinery 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 Guocheng Mining with a short position of Masterwork Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guocheng Mining and Masterwork Machinery.

Diversification Opportunities for Guocheng Mining and Masterwork Machinery

0.65

Correlation Coefficient

Guocheng Mining  Masterwork Machinery

Poor diversification

The 3 months correlation between Guocheng and Masterwork is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Guocheng Mining Co and Masterwork Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterwork Machinery and Guocheng Mining 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 Guocheng Mining Co are associated (or correlated) with Masterwork Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masterwork Machinery has no effect on the direction of Guocheng Mining i.e., Guocheng Mining and Masterwork Machinery go up and down completely randomly.

Pair Corralation between Guocheng Mining and Masterwork Machinery

Assuming the 90 days trading horizon Guocheng Mining is expected to generate 11.43 times less return on investment than Masterwork Machinery. But when comparing it to its historical volatility, Guocheng Mining Co is 1.59 times less risky than Masterwork Machinery. It trades about 0.01 of its potential returns per unit of risk. Masterwork Machinery is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  584.00  in Masterwork Machinery on December 26, 2024 and sell it today you would earn a total of  91.00  from holding Masterwork Machinery or generate 15.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.28%
Values	Daily Returns

Guocheng Mining Co  vs.  Masterwork Machinery

Guocheng Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guocheng Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guocheng Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Masterwork Machinery

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masterwork Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guocheng Mining and Masterwork Machinery

The main advantage of trading using opposite Guocheng Mining and Masterwork Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guocheng Mining position performs unexpectedly, Masterwork Machinery 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 Masterwork Machinery will offset losses from the drop in Masterwork Machinery's long position.

The idea behind Guocheng Mining Co and Masterwork Machinery 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.