Correlation Between Sichuan Jinshi and Masterwork Machinery

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

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

Diversification Opportunities for Sichuan Jinshi and Masterwork Machinery

0.66

Correlation Coefficient

Sichuan Jinshi  Masterwork Machinery

Poor diversification

The 3 months correlation between Sichuan and Masterwork is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Jinshi Technology and Masterwork Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterwork Machinery and Sichuan Jinshi 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 Sichuan Jinshi Technology 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 Sichuan Jinshi i.e., Sichuan Jinshi and Masterwork Machinery go up and down completely randomly.

Pair Corralation between Sichuan Jinshi and Masterwork Machinery

Assuming the 90 days trading horizon Sichuan Jinshi Technology is expected to generate 0.67 times more return on investment than Masterwork Machinery. However, Sichuan Jinshi Technology is 1.49 times less risky than Masterwork Machinery. It trades about 0.17 of its potential returns per unit of risk. Masterwork Machinery is currently generating about 0.03 per unit of risk. If you would invest  554.00  in Sichuan Jinshi Technology on October 10, 2024 and sell it today you would earn a total of  168.00  from holding Sichuan Jinshi Technology or generate 30.32% return on investment over 90 days.

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

Sichuan Jinshi Technology  vs.  Masterwork Machinery

Sichuan Jinshi Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Jinshi sustained solid returns over the last few months and may actually be approaching a breakup point.

Masterwork Machinery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masterwork Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sichuan Jinshi and Masterwork Machinery

The main advantage of trading using opposite Sichuan Jinshi and Masterwork Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sichuan Jinshi 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 Sichuan Jinshi Technology 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.