Correlation Between U Ming and Roundtop Machinery

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

By analyzing existing cross correlation between U Ming Marine Transport and Roundtop Machinery Industries, you can compare the effects of market volatilities on U Ming and Roundtop 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 U Ming with a short position of Roundtop Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and Roundtop Machinery.

Diversification Opportunities for U Ming and Roundtop Machinery

-0.81

Correlation Coefficient

U Ming  Roundtop Machinery

Pay attention - limited upside

The 3 months correlation between 2606 and Roundtop is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Roundtop Machinery Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundtop Machinery and U Ming 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 U Ming Marine Transport are associated (or correlated) with Roundtop Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundtop Machinery has no effect on the direction of U Ming i.e., U Ming and Roundtop Machinery go up and down completely randomly.

Pair Corralation between U Ming and Roundtop Machinery

Assuming the 90 days trading horizon U Ming Marine Transport is expected to generate 0.46 times more return on investment than Roundtop Machinery. However, U Ming Marine Transport is 2.15 times less risky than Roundtop Machinery. It trades about 0.13 of its potential returns per unit of risk. Roundtop Machinery Industries is currently generating about -0.13 per unit of risk. If you would invest  5,180  in U Ming Marine Transport on September 16, 2024 and sell it today you would earn a total of  540.00  from holding U Ming Marine Transport or generate 10.42% return on investment over 90 days.

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

U Ming Marine Transport  vs.  Roundtop Machinery Industries

U Ming Marine

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Roundtop Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roundtop Machinery Industries 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with U Ming and Roundtop Machinery

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

The idea behind U Ming Marine Transport and Roundtop Machinery Industries 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.