Correlation Between Masterwork Machinery and Jiaozuo Wanfang

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

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

Diversification Opportunities for Masterwork Machinery and Jiaozuo Wanfang

0.13

Correlation Coefficient

Masterwork Machinery  Jiaozuo Wanfang

Average diversification

The 3 months correlation between Masterwork and Jiaozuo is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Masterwork Machinery and Jiaozuo Wanfang Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiaozuo Wanfang Aluminum and Masterwork Machinery 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 Masterwork Machinery are associated (or correlated) with Jiaozuo Wanfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiaozuo Wanfang Aluminum has no effect on the direction of Masterwork Machinery i.e., Masterwork Machinery and Jiaozuo Wanfang go up and down completely randomly.

Pair Corralation between Masterwork Machinery and Jiaozuo Wanfang

Assuming the 90 days trading horizon Masterwork Machinery is expected to generate 1.4 times less return on investment than Jiaozuo Wanfang. In addition to that, Masterwork Machinery is 1.21 times more volatile than Jiaozuo Wanfang Aluminum. It trades about 0.02 of its total potential returns per unit of risk. Jiaozuo Wanfang Aluminum is currently generating about 0.03 per unit of volatility. If you would invest  514.00  in Jiaozuo Wanfang Aluminum on October 4, 2024 and sell it today you would earn a total of  128.00  from holding Jiaozuo Wanfang Aluminum or generate 24.9% return on investment over 90 days.

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

Masterwork Machinery  vs.  Jiaozuo Wanfang Aluminum

Masterwork Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jiaozuo Wanfang Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiaozuo Wanfang Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Masterwork Machinery and Jiaozuo Wanfang

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

The idea behind Masterwork Machinery and Jiaozuo Wanfang Aluminum 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.