Correlation Between Camellia Metal and Information Technology

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

Diversification Opportunities for Camellia Metal and Information Technology

0.5

Correlation Coefficient

Camellia Metal  Information Technology

Very weak diversification

The 3 months correlation between Camellia and Information is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Camellia Metal Co and Information Technology Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Technology 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 Information Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Technology has no effect on the direction of Camellia Metal i.e., Camellia Metal and Information Technology go up and down completely randomly.

Pair Corralation between Camellia Metal and Information Technology

Assuming the 90 days trading horizon Camellia Metal is expected to generate 13.12 times less return on investment than Information Technology. But when comparing it to its historical volatility, Camellia Metal Co is 2.91 times less risky than Information Technology. It trades about 0.02 of its potential returns per unit of risk. Information Technology Total is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,366  in Information Technology Total on December 27, 2024 and sell it today you would earn a total of  454.00  from holding Information Technology Total or generate 10.4% return on investment over 90 days.

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

Camellia Metal Co  vs.  Information Technology Total

Camellia Metal

Risk-Adjusted Performance

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.

Information Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Information Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Camellia Metal and Information Technology

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

The idea behind Camellia Metal Co and Information Technology Total 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.