Correlation Between China Metal and Powertech Industrial

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

Diversification Opportunities for China Metal and Powertech Industrial

0.44

Correlation Coefficient

China Metal  Powertech Industrial

Very weak diversification

The 3 months correlation between China and Powertech is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Powertech Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powertech Industrial 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 Powertech Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powertech Industrial has no effect on the direction of China Metal i.e., China Metal and Powertech Industrial go up and down completely randomly.

Pair Corralation between China Metal and Powertech Industrial

Assuming the 90 days trading horizon China Metal Products is expected to generate 0.6 times more return on investment than Powertech Industrial. However, China Metal Products is 1.66 times less risky than Powertech Industrial. It trades about -0.02 of its potential returns per unit of risk. Powertech Industrial Co is currently generating about -0.18 per unit of risk. If you would invest  3,145  in China Metal Products on December 23, 2024 and sell it today you would lose (50.00) from holding China Metal Products or give up 1.59% of portfolio value over 90 days.

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

China Metal Products  vs.  Powertech Industrial Co

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.

Powertech Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Powertech Industrial Co 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 April 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 Powertech Industrial

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

The idea behind China Metal Products and Powertech Industrial 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.