Correlation Between Beijing Jiaman and Masterwork Machinery

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

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

Diversification Opportunities for Beijing Jiaman and Masterwork Machinery

0.47

Correlation Coefficient

Beijing Jiaman  Masterwork Machinery

Very weak diversification

The 3 months correlation between Beijing and Masterwork is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Jiaman Dress and Masterwork Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterwork Machinery and Beijing Jiaman 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 Beijing Jiaman Dress are associated (or correlated) with Masterwork Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masterwork Machinery has no effect on the direction of Beijing Jiaman i.e., Beijing Jiaman and Masterwork Machinery go up and down completely randomly.

Pair Corralation between Beijing Jiaman and Masterwork Machinery

Assuming the 90 days trading horizon Beijing Jiaman Dress is expected to generate 0.9 times more return on investment than Masterwork Machinery. However, Beijing Jiaman Dress is 1.11 times less risky than Masterwork Machinery. It trades about -0.29 of its potential returns per unit of risk. Masterwork Machinery is currently generating about -0.46 per unit of risk. If you would invest  2,237  in Beijing Jiaman Dress on October 14, 2024 and sell it today you would lose (326.00) from holding Beijing Jiaman Dress or give up 14.57% of portfolio value over 90 days.

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

Beijing Jiaman Dress  vs.  Masterwork Machinery

Beijing Jiaman Dress

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beijing Jiaman Dress 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.

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.

Pair Trading with Beijing Jiaman and Masterwork Machinery

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

The idea behind Beijing Jiaman Dress and Masterwork Machinery 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..