Correlation Between China Metal and Est Global

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

Diversification Opportunities for China Metal and Est Global

0.29

Correlation Coefficient

China Metal  Est Global

Modest diversification

The 3 months correlation between China and Est is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Est Global Apparel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Est Global Apparel 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 Est Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Est Global Apparel has no effect on the direction of China Metal i.e., China Metal and Est Global go up and down completely randomly.

Pair Corralation between China Metal and Est Global

Assuming the 90 days trading horizon China Metal Products is expected to under-perform the Est Global. But the stock apears to be less risky and, when comparing its historical volatility, China Metal Products is 2.55 times less risky than Est Global. The stock trades about -0.28 of its potential returns per unit of risk. The Est Global Apparel is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,785  in Est Global Apparel on October 9, 2024 and sell it today you would lose (90.00) from holding Est Global Apparel or give up 5.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

China Metal Products  vs.  Est Global Apparel

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.

Est Global Apparel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Est Global Apparel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Est Global 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 Est Global

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

The idea behind China Metal Products and Est Global Apparel 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.