Correlation Between Masterwork Machinery and Sichuan Jinshi

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

By analyzing existing cross correlation between Masterwork Machinery and Sichuan Jinshi Technology, you can compare the effects of market volatilities on Masterwork Machinery and Sichuan Jinshi 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 Sichuan Jinshi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masterwork Machinery and Sichuan Jinshi.

Diversification Opportunities for Masterwork Machinery and Sichuan Jinshi

0.69

Correlation Coefficient

Masterwork Machinery  Sichuan Jinshi

Poor diversification

The 3 months correlation between Masterwork and Sichuan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Masterwork Machinery and Sichuan Jinshi Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Jinshi Technology 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 Sichuan Jinshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Jinshi Technology has no effect on the direction of Masterwork Machinery i.e., Masterwork Machinery and Sichuan Jinshi go up and down completely randomly.

Pair Corralation between Masterwork Machinery and Sichuan Jinshi

Assuming the 90 days trading horizon Masterwork Machinery is expected to under-perform the Sichuan Jinshi. In addition to that, Masterwork Machinery is 1.03 times more volatile than Sichuan Jinshi Technology. It trades about -0.45 of its total potential returns per unit of risk. Sichuan Jinshi Technology is currently generating about 0.01 per unit of volatility. If you would invest  723.00  in Sichuan Jinshi Technology on October 9, 2024 and sell it today you would lose (1.00) from holding Sichuan Jinshi Technology or give up 0.14% of portfolio value over 90 days.

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

Masterwork Machinery  vs.  Sichuan Jinshi Technology

Masterwork Machinery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masterwork Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sichuan Jinshi Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Jinshi Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Jinshi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Masterwork Machinery and Sichuan Jinshi

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

The idea behind Masterwork Machinery and Sichuan Jinshi Technology 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.