Correlation Between China Metal and Wha Yu

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

Diversification Opportunities for China Metal and Wha Yu

0.64

Correlation Coefficient

China Metal  Wha Yu

Poor diversification

The 3 months correlation between China and Wha is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Wha Yu Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wha Yu 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 Wha Yu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wha Yu Industrial has no effect on the direction of China Metal i.e., China Metal and Wha Yu go up and down completely randomly.

Pair Corralation between China Metal and Wha Yu

Assuming the 90 days trading horizon China Metal Products is expected to generate 0.75 times more return on investment than Wha Yu. However, China Metal Products is 1.33 times less risky than Wha Yu. It trades about 0.0 of its potential returns per unit of risk. Wha Yu Industrial is currently generating about -0.04 per unit of risk. If you would invest  3,080  in China Metal Products on December 20, 2024 and sell it today you would lose (10.00) from holding China Metal Products or give up 0.32% of portfolio value over 90 days.

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

China Metal Products  vs.  Wha Yu Industrial

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.

Wha Yu Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wha Yu Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wha Yu is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with China Metal and Wha Yu

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

The idea behind China Metal Products and Wha Yu Industrial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.