Correlation Between Camellia Metal and China Development

Can any of the company-specific risk be diversified away by investing in both Camellia Metal and China Development 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 Camellia Metal and China Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Camellia Metal Co and China Development Financial, you can compare the effects of market volatilities on Camellia Metal and China Development 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 Camellia Metal with a short position of China Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Camellia Metal and China Development.

Diversification Opportunities for Camellia Metal and China Development

-0.26

Correlation Coefficient

Camellia Metal  China Development

Very good diversification

The 3 months correlation between Camellia and China is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Camellia Metal Co and China Development Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Development and Camellia 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 Camellia Metal Co are associated (or correlated) with China Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Development has no effect on the direction of Camellia Metal i.e., Camellia Metal and China Development go up and down completely randomly.

Pair Corralation between Camellia Metal and China Development

Assuming the 90 days trading horizon Camellia Metal is expected to generate 7.58 times less return on investment than China Development. In addition to that, Camellia Metal is 1.56 times more volatile than China Development Financial. It trades about 0.02 of its total potential returns per unit of risk. China Development Financial is currently generating about 0.18 per unit of volatility. If you would invest  1,600  in China Development Financial on September 14, 2024 and sell it today you would earn a total of  225.00  from holding China Development Financial or generate 14.06% return on investment over 90 days.

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

Camellia Metal Co  vs.  China Development Financial

Camellia Metal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Camellia Metal Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Camellia Metal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

China Development

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Development Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Development showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Camellia Metal and China Development

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

The idea behind Camellia Metal Co and China Development Financial 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.