Correlation Between USI Corp and China Man

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

By analyzing existing cross correlation between USI Corp and China Man Made Fiber, you can compare the effects of market volatilities on USI Corp and China Man 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 USI Corp with a short position of China Man. Check out your portfolio center. Please also check ongoing floating volatility patterns of USI Corp and China Man.

Diversification Opportunities for USI Corp and China Man

0.59

Correlation Coefficient

USI Corp  China Man

Very weak diversification

The 3 months correlation between USI and China is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding USI Corp and China Man Made Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Man Made and USI Corp 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 USI Corp are associated (or correlated) with China Man. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Man Made has no effect on the direction of USI Corp i.e., USI Corp and China Man go up and down completely randomly.

Pair Corralation between USI Corp and China Man

Assuming the 90 days trading horizon USI Corp is expected to generate 2.6 times more return on investment than China Man. However, USI Corp is 2.6 times more volatile than China Man Made Fiber. It trades about 0.03 of its potential returns per unit of risk. China Man Made Fiber is currently generating about -0.06 per unit of risk. If you would invest  1,095  in USI Corp on December 28, 2024 and sell it today you would earn a total of  20.00  from holding USI Corp or generate 1.83% return on investment over 90 days.

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

USI Corp  vs.  China Man Made Fiber

USI Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in USI Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, USI Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

China Man Made

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Man Made Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China Man is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with USI Corp and China Man

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

The idea behind USI Corp and China Man Made Fiber 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.