Correlation Between Masterwork Machinery and Jiangsu Rongtai

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

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

Diversification Opportunities for Masterwork Machinery and Jiangsu Rongtai

0.33

Correlation Coefficient

Masterwork Machinery  Jiangsu Rongtai

Weak diversification

The 3 months correlation between Masterwork and Jiangsu is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Masterwork Machinery and Jiangsu Rongtai Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Rongtai Industry 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 Jiangsu Rongtai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Rongtai Industry has no effect on the direction of Masterwork Machinery i.e., Masterwork Machinery and Jiangsu Rongtai go up and down completely randomly.

Pair Corralation between Masterwork Machinery and Jiangsu Rongtai

Assuming the 90 days trading horizon Masterwork Machinery is expected to generate 0.93 times more return on investment than Jiangsu Rongtai. However, Masterwork Machinery is 1.08 times less risky than Jiangsu Rongtai. It trades about 0.01 of its potential returns per unit of risk. Jiangsu Rongtai Industry is currently generating about -0.01 per unit of risk. If you would invest  594.00  in Masterwork Machinery on October 26, 2024 and sell it today you would lose (34.00) from holding Masterwork Machinery or give up 5.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Masterwork Machinery  vs.  Jiangsu Rongtai Industry

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.

Jiangsu Rongtai Industry

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Rongtai Industry are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Rongtai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Masterwork Machinery and Jiangsu Rongtai

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

The idea behind Masterwork Machinery and Jiangsu Rongtai Industry 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.