Correlation Between Automobile and MS Autotech

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

By analyzing existing cross correlation between Automobile Pc and MS Autotech CoLtd, you can compare the effects of market volatilities on Automobile and MS Autotech 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 Automobile with a short position of MS Autotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automobile and MS Autotech.

Diversification Opportunities for Automobile and MS Autotech

-0.39

Correlation Coefficient

Automobile  MS Autotech

Very good diversification

The 3 months correlation between Automobile and 123040 is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc and MS Autotech CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MS Autotech CoLtd and Automobile 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 Automobile Pc are associated (or correlated) with MS Autotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MS Autotech CoLtd has no effect on the direction of Automobile i.e., Automobile and MS Autotech go up and down completely randomly.

Pair Corralation between Automobile and MS Autotech

Assuming the 90 days trading horizon Automobile Pc is expected to under-perform the MS Autotech. But the stock apears to be less risky and, when comparing its historical volatility, Automobile Pc is 2.37 times less risky than MS Autotech. The stock trades about -0.16 of its potential returns per unit of risk. The MS Autotech CoLtd is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  249,000  in MS Autotech CoLtd on December 26, 2024 and sell it today you would earn a total of  45,500  from holding MS Autotech CoLtd or generate 18.27% return on investment over 90 days.

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

Automobile Pc  vs.  MS Autotech CoLtd

Automobile Pc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automobile Pc 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

MS Autotech CoLtd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MS Autotech CoLtd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MS Autotech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automobile and MS Autotech

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

The idea behind Automobile Pc and MS Autotech CoLtd 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 Transaction History module to view history of all your transactions and understand their impact on performance.