Correlation Between Nanjing Putian and Masterwork Machinery

Can any of the company-specific risk be diversified away by investing in both Nanjing Putian and Masterwork Machinery 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 Nanjing Putian and Masterwork Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nanjing Putian Telecommunications and Masterwork Machinery, you can compare the effects of market volatilities on Nanjing Putian and Masterwork Machinery 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 Nanjing Putian with a short position of Masterwork Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nanjing Putian and Masterwork Machinery.

Diversification Opportunities for Nanjing Putian and Masterwork Machinery

0.25

Correlation Coefficient

Nanjing Putian  Masterwork Machinery

Modest diversification

The 3 months correlation between Nanjing and Masterwork is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nanjing Putian Telecommunicati and Masterwork Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterwork Machinery and Nanjing Putian 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 Nanjing Putian Telecommunications are associated (or correlated) with Masterwork Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masterwork Machinery has no effect on the direction of Nanjing Putian i.e., Nanjing Putian and Masterwork Machinery go up and down completely randomly.

Pair Corralation between Nanjing Putian and Masterwork Machinery

Assuming the 90 days trading horizon Nanjing Putian Telecommunications is expected to under-perform the Masterwork Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Nanjing Putian Telecommunications is 1.3 times less risky than Masterwork Machinery. The stock trades about -0.02 of its potential returns per unit of risk. The Masterwork Machinery is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  594.00  in Masterwork Machinery on December 27, 2024 and sell it today you would earn a total of  81.00  from holding Masterwork Machinery or generate 13.64% return on investment over 90 days.

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

Nanjing Putian Telecommunicati  vs.  Masterwork Machinery

Nanjing Putian Telec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nanjing Putian Telecommunications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nanjing Putian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Masterwork Machinery

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masterwork Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nanjing Putian and Masterwork Machinery

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

The idea behind Nanjing Putian Telecommunications and Masterwork Machinery 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.