Correlation Between Western Metal and CICC Fund

Can any of the company-specific risk be diversified away by investing in both Western Metal and CICC Fund 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 Western Metal and CICC Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Metal Materials and CICC Fund Management, you can compare the effects of market volatilities on Western Metal and CICC Fund 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 Western Metal with a short position of CICC Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Metal and CICC Fund.

Diversification Opportunities for Western Metal and CICC Fund

0.45

Correlation Coefficient

Western Metal  CICC Fund

Very weak diversification

The 3 months correlation between Western and CICC is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Western Metal Materials and CICC Fund Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CICC Fund Management and Western Metal 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 Western Metal Materials are associated (or correlated) with CICC Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CICC Fund Management has no effect on the direction of Western Metal i.e., Western Metal and CICC Fund go up and down completely randomly.

Pair Corralation between Western Metal and CICC Fund

Assuming the 90 days trading horizon Western Metal Materials is expected to generate 3.05 times more return on investment than CICC Fund. However, Western Metal is 3.05 times more volatile than CICC Fund Management. It trades about 0.03 of its potential returns per unit of risk. CICC Fund Management is currently generating about 0.08 per unit of risk. If you would invest  1,475  in Western Metal Materials on October 4, 2024 and sell it today you would earn a total of  295.00  from holding Western Metal Materials or generate 20.0% return on investment over 90 days.

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

Western Metal Materials  vs.  CICC Fund Management

Western Metal Materials

Risk-Adjusted Performance

6 of 100

Modest

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

CICC Fund Management

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CICC Fund Management are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CICC Fund sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Metal and CICC Fund

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

The idea behind Western Metal Materials and CICC Fund Management 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.