Correlation Between China Metal and Newretail

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

Diversification Opportunities for China Metal and Newretail

-0.79

Correlation Coefficient

China Metal  Newretail

Pay attention - limited upside

The 3 months correlation between China and Newretail is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Newretail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newretail 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 Newretail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newretail has no effect on the direction of China Metal i.e., China Metal and Newretail go up and down completely randomly.

Pair Corralation between China Metal and Newretail

Assuming the 90 days trading horizon China Metal is expected to generate 10.2 times less return on investment than Newretail. But when comparing it to its historical volatility, China Metal Products is 2.57 times less risky than Newretail. It trades about 0.01 of its potential returns per unit of risk. Newretail Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,200  in Newretail Co on October 25, 2024 and sell it today you would earn a total of  120.00  from holding Newretail Co or generate 5.45% return on investment over 90 days.

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

China Metal Products  vs.  Newretail Co

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 weak 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.

Newretail

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Newretail Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Newretail showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Metal and Newretail

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

The idea behind China Metal Products and Newretail Co 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.