Correlation Between Masterwork Machinery and Shaanxi Broadcast

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

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

Diversification Opportunities for Masterwork Machinery and Shaanxi Broadcast

0.87

Correlation Coefficient

Masterwork Machinery  Shaanxi Broadcast

Very poor diversification

The 3 months correlation between Masterwork and Shaanxi is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Masterwork Machinery and Shaanxi Broadcast TV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Broadcast 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 Shaanxi Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Broadcast has no effect on the direction of Masterwork Machinery i.e., Masterwork Machinery and Shaanxi Broadcast go up and down completely randomly.

Pair Corralation between Masterwork Machinery and Shaanxi Broadcast

Assuming the 90 days trading horizon Masterwork Machinery is expected to generate 1.71 times more return on investment than Shaanxi Broadcast. However, Masterwork Machinery is 1.71 times more volatile than Shaanxi Broadcast TV. It trades about -0.06 of its potential returns per unit of risk. Shaanxi Broadcast TV is currently generating about -0.14 per unit of risk. If you would invest  598.00  in Masterwork Machinery on October 9, 2024 and sell it today you would lose (84.00) from holding Masterwork Machinery or give up 14.05% of portfolio value over 90 days.

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

Masterwork Machinery  vs.  Shaanxi Broadcast TV

Masterwork Machinery

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Shaanxi Broadcast

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shaanxi Broadcast TV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shaanxi Broadcast is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Masterwork Machinery and Shaanxi Broadcast

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

The idea behind Masterwork Machinery and Shaanxi Broadcast TV 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.