Correlation Between Changzhou Almaden and China Marine

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

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

Diversification Opportunities for Changzhou Almaden and China Marine

0.56

Correlation Coefficient

Changzhou Almaden  China Marine

Very weak diversification

The 3 months correlation between Changzhou and China is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Changzhou Almaden Co and China Marine Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Marine Information and Changzhou Almaden 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 Changzhou Almaden Co are associated (or correlated) with China Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Marine Information has no effect on the direction of Changzhou Almaden i.e., Changzhou Almaden and China Marine go up and down completely randomly.

Pair Corralation between Changzhou Almaden and China Marine

Assuming the 90 days trading horizon Changzhou Almaden Co is expected to under-perform the China Marine. But the stock apears to be less risky and, when comparing its historical volatility, Changzhou Almaden Co is 1.28 times less risky than China Marine. The stock trades about 0.0 of its potential returns per unit of risk. The China Marine Information is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,799  in China Marine Information on October 7, 2024 and sell it today you would earn a total of  752.00  from holding China Marine Information or generate 41.8% return on investment over 90 days.

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

Changzhou Almaden Co  vs.  China Marine Information

Changzhou Almaden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Changzhou Almaden Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

China Marine Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Changzhou Almaden and China Marine

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

The idea behind Changzhou Almaden Co and China Marine Information 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.