Correlation Between Materials Analysis and China Metal

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

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

Diversification Opportunities for Materials Analysis and China Metal

0.34

Correlation Coefficient

Materials Analysis  China Metal

Weak diversification

The 3 months correlation between Materials and China is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Materials Analysis Technology and China Metal Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Metal Products and Materials Analysis 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 Materials Analysis Technology are associated (or correlated) with China Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Metal Products has no effect on the direction of Materials Analysis i.e., Materials Analysis and China Metal go up and down completely randomly.

Pair Corralation between Materials Analysis and China Metal

Assuming the 90 days trading horizon Materials Analysis Technology is expected to under-perform the China Metal. In addition to that, Materials Analysis is 1.5 times more volatile than China Metal Products. It trades about -0.17 of its total potential returns per unit of risk. China Metal Products is currently generating about -0.03 per unit of volatility. If you would invest  3,325  in China Metal Products on December 5, 2024 and sell it today you would lose (85.00) from holding China Metal Products or give up 2.56% of portfolio value over 90 days.

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

Materials Analysis Technology  vs.  China Metal Products

Materials Analysis

Risk-Adjusted Performance

Very Weak

Over the last 90 days Materials Analysis Technology 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.

China Metal Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Metal Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China Metal 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 Materials Analysis and China Metal

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

The idea behind Materials Analysis Technology and China Metal Products 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.