Correlation Between China Metal and Emerging Display

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

Diversification Opportunities for China Metal and Emerging Display

0.69

Correlation Coefficient

China Metal  Emerging Display

Poor diversification

The 3 months correlation between China and Emerging is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Emerging Display Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Display 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 Emerging Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Display Tec has no effect on the direction of China Metal i.e., China Metal and Emerging Display go up and down completely randomly.

Pair Corralation between China Metal and Emerging Display

Assuming the 90 days trading horizon China Metal Products is expected to under-perform the Emerging Display. But the stock apears to be less risky and, when comparing its historical volatility, China Metal Products is 1.23 times less risky than Emerging Display. The stock trades about -0.02 of its potential returns per unit of risk. The Emerging Display Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,620  in Emerging Display Technologies on December 24, 2024 and sell it today you would earn a total of  235.00  from holding Emerging Display Technologies or generate 8.97% return on investment over 90 days.

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

China Metal Products  vs.  Emerging Display Technologies

China Metal Products

Risk-Adjusted Performance

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 fairly stable basic indicators, China Metal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Emerging Display Tec

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Display Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Emerging Display may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Metal and Emerging Display

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

The idea behind China Metal Products and Emerging Display Technologies 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.