Correlation Between Materialise and CHINA HUARONG

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

By analyzing existing cross correlation between Materialise NV and CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on Materialise and CHINA HUARONG 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 Materialise with a short position of CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materialise and CHINA HUARONG.

Diversification Opportunities for Materialise and CHINA HUARONG

-0.54

Correlation Coefficient

Materialise  CHINA HUARONG

Excellent diversification

The 3 months correlation between Materialise and CHINA is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD and Materialise 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 Materialise NV are associated (or correlated) with CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of Materialise i.e., Materialise and CHINA HUARONG go up and down completely randomly.

Pair Corralation between Materialise and CHINA HUARONG

Assuming the 90 days trading horizon Materialise NV is expected to under-perform the CHINA HUARONG. But the stock apears to be less risky and, when comparing its historical volatility, Materialise NV is 3.94 times less risky than CHINA HUARONG. The stock trades about -0.05 of its potential returns per unit of risk. The CHINA HUARONG ENERHD 50 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.15  in CHINA HUARONG ENERHD 50 on October 8, 2024 and sell it today you would earn a total of  0.00  from holding CHINA HUARONG ENERHD 50 or generate 0.0% return on investment over 90 days.

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

Materialise NV  vs.  CHINA HUARONG ENERHD 50

Materialise NV

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

CHINA HUARONG ENERHD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA HUARONG ENERHD 50 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CHINA HUARONG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Materialise and CHINA HUARONG

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

The idea behind Materialise NV and CHINA HUARONG ENERHD 50 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.