Correlation Between MASI AGRICOLA and China Communications

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

By analyzing existing cross correlation between MASI AGRICOLA SPA and China Communications Services, you can compare the effects of market volatilities on MASI AGRICOLA and China Communications 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 MASI AGRICOLA with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of MASI AGRICOLA and China Communications.

Diversification Opportunities for MASI AGRICOLA and China Communications

-0.25

Correlation Coefficient

MASI AGRICOLA  China Communications

Very good diversification

The 3 months correlation between MASI and China is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding MASI AGRICOLA SPA and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and MASI AGRICOLA 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 MASI AGRICOLA SPA are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of MASI AGRICOLA i.e., MASI AGRICOLA and China Communications go up and down completely randomly.

Pair Corralation between MASI AGRICOLA and China Communications

Assuming the 90 days horizon MASI AGRICOLA is expected to generate 18.45 times less return on investment than China Communications. But when comparing it to its historical volatility, MASI AGRICOLA SPA is 3.82 times less risky than China Communications. It trades about 0.02 of its potential returns per unit of risk. China Communications Services is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9.02  in China Communications Services on October 5, 2024 and sell it today you would earn a total of  45.98  from holding China Communications Services or generate 509.76% return on investment over 90 days.

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

MASI AGRICOLA SPA  vs.  China Communications Services

MASI AGRICOLA SPA

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days MASI AGRICOLA SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MASI AGRICOLA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China Communications

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days China Communications Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, China Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MASI AGRICOLA and China Communications

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

The idea behind MASI AGRICOLA SPA and China Communications Services 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.