Correlation Between China Metal and Prince Housing

Can any of the company-specific risk be diversified away by investing in both China Metal and Prince Housing 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 Prince Housing 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 Prince Housing Development, you can compare the effects of market volatilities on China Metal and Prince Housing 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 Prince Housing. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and Prince Housing.

Diversification Opportunities for China Metal and Prince Housing

0.24

Correlation Coefficient

China Metal  Prince Housing

Modest diversification

The 3 months correlation between China and Prince is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Prince Housing Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prince Housing Devel 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 Prince Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prince Housing Devel has no effect on the direction of China Metal i.e., China Metal and Prince Housing go up and down completely randomly.

Pair Corralation between China Metal and Prince Housing

Assuming the 90 days trading horizon China Metal Products is expected to under-perform the Prince Housing. In addition to that, China Metal is 1.25 times more volatile than Prince Housing Development. It trades about -0.28 of its total potential returns per unit of risk. Prince Housing Development is currently generating about -0.3 per unit of volatility. If you would invest  1,080  in Prince Housing Development on October 6, 2024 and sell it today you would lose (65.00) from holding Prince Housing Development or give up 6.02% of portfolio value over 90 days.

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

China Metal Products  vs.  Prince Housing Development

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.

Prince Housing Devel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prince Housing Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with China Metal and Prince Housing

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

The idea behind China Metal Products and Prince Housing Development 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.