Correlation Between Powertech Industrial and Great China

Can any of the company-specific risk be diversified away by investing in both Powertech Industrial and Great China 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 Powertech Industrial and Great China into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Powertech Industrial Co and Great China Metal, you can compare the effects of market volatilities on Powertech Industrial and Great China 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 Powertech Industrial with a short position of Great China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Powertech Industrial and Great China.

Diversification Opportunities for Powertech Industrial and Great China

-0.65

Correlation Coefficient

Powertech Industrial  Great China

Excellent diversification

The 3 months correlation between Powertech and Great is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Powertech Industrial Co and Great China Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great China Metal and Powertech Industrial 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 Powertech Industrial Co are associated (or correlated) with Great China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great China Metal has no effect on the direction of Powertech Industrial i.e., Powertech Industrial and Great China go up and down completely randomly.

Pair Corralation between Powertech Industrial and Great China

Assuming the 90 days trading horizon Powertech Industrial Co is expected to under-perform the Great China. In addition to that, Powertech Industrial is 3.64 times more volatile than Great China Metal. It trades about -0.19 of its total potential returns per unit of risk. Great China Metal is currently generating about 0.11 per unit of volatility. If you would invest  2,290  in Great China Metal on December 30, 2024 and sell it today you would earn a total of  75.00  from holding Great China Metal or generate 3.28% return on investment over 90 days.

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

Powertech Industrial Co  vs.  Great China Metal

Powertech Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Powertech Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Great China Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great China Metal are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Great China is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Powertech Industrial and Great China

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

The idea behind Powertech Industrial Co and Great China Metal 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.