Correlation Between China Nonferrous and Industrial Bank

Can any of the company-specific risk be diversified away by investing in both China Nonferrous and Industrial Bank 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 Nonferrous and Industrial Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Nonferrous Metal and Industrial Bank Co, you can compare the effects of market volatilities on China Nonferrous and Industrial Bank 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 Nonferrous with a short position of Industrial Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Nonferrous and Industrial Bank.

Diversification Opportunities for China Nonferrous and Industrial Bank

0.7

Correlation Coefficient

China Nonferrous  Industrial Bank

Poor diversification

The 3 months correlation between China and Industrial is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Nonferrous Metal and Industrial Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank and China Nonferrous 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 Nonferrous Metal are associated (or correlated) with Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of China Nonferrous i.e., China Nonferrous and Industrial Bank go up and down completely randomly.

Pair Corralation between China Nonferrous and Industrial Bank

Assuming the 90 days trading horizon China Nonferrous is expected to generate 2.93 times less return on investment than Industrial Bank. In addition to that, China Nonferrous is 1.41 times more volatile than Industrial Bank Co. It trades about 0.01 of its total potential returns per unit of risk. Industrial Bank Co is currently generating about 0.04 per unit of volatility. If you would invest  1,735  in Industrial Bank Co on September 19, 2024 and sell it today you would earn a total of  101.00  from holding Industrial Bank Co or generate 5.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

China Nonferrous Metal  vs.  Industrial Bank Co

China Nonferrous Metal

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Nonferrous Metal are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Nonferrous sustained solid returns over the last few months and may actually be approaching a breakup point.

Industrial Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Nonferrous and Industrial Bank

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

The idea behind China Nonferrous Metal and Industrial Bank Co 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.