Correlation Between PLAYMATES TOYS and China BlueChemical

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

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

Diversification Opportunities for PLAYMATES TOYS and China BlueChemical

-0.03

Correlation Coefficient

PLAYMATES TOYS  China BlueChemical

Good diversification

The 3 months correlation between PLAYMATES and China is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding PLAYMATES TOYS and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical and PLAYMATES TOYS 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 PLAYMATES TOYS are associated (or correlated) with China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of PLAYMATES TOYS i.e., PLAYMATES TOYS and China BlueChemical go up and down completely randomly.

Pair Corralation between PLAYMATES TOYS and China BlueChemical

Assuming the 90 days trading horizon PLAYMATES TOYS is expected to generate 1.4 times more return on investment than China BlueChemical. However, PLAYMATES TOYS is 1.4 times more volatile than China BlueChemical. It trades about 0.02 of its potential returns per unit of risk. China BlueChemical is currently generating about 0.02 per unit of risk. If you would invest  6.90  in PLAYMATES TOYS on December 23, 2024 and sell it today you would lose (0.10) from holding PLAYMATES TOYS or give up 1.45% of portfolio value over 90 days.

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

PLAYMATES TOYS  vs.  China BlueChemical

PLAYMATES TOYS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYMATES TOYS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PLAYMATES TOYS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

China BlueChemical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China BlueChemical is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PLAYMATES TOYS and China BlueChemical

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

The idea behind PLAYMATES TOYS and China BlueChemical 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.