Correlation Between China Metal and Amulaire Thermal

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

By analyzing existing cross correlation between China Metal Products and Amulaire Thermal Technology, you can compare the effects of market volatilities on China Metal and Amulaire Thermal 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 China Metal with a short position of Amulaire Thermal. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and Amulaire Thermal.

Diversification Opportunities for China Metal and Amulaire Thermal

0.83

Correlation Coefficient

China Metal  Amulaire Thermal

Very poor diversification

The 3 months correlation between China and Amulaire is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Amulaire Thermal Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amulaire Thermal Tec and China Metal 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 China Metal Products are associated (or correlated) with Amulaire Thermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amulaire Thermal Tec has no effect on the direction of China Metal i.e., China Metal and Amulaire Thermal go up and down completely randomly.

Pair Corralation between China Metal and Amulaire Thermal

Assuming the 90 days trading horizon China Metal Products is expected to under-perform the Amulaire Thermal. But the stock apears to be less risky and, when comparing its historical volatility, China Metal Products is 2.85 times less risky than Amulaire Thermal. The stock trades about -0.16 of its potential returns per unit of risk. The Amulaire Thermal Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,695  in Amulaire Thermal Technology on October 20, 2024 and sell it today you would earn a total of  70.00  from holding Amulaire Thermal Technology or generate 2.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

China Metal Products  vs.  Amulaire Thermal Technology

China Metal Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Metal Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Amulaire Thermal Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amulaire Thermal Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with China Metal and Amulaire Thermal

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

The idea behind China Metal Products and Amulaire Thermal Technology 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..