Correlation Between Chinese Universe and Wuxi Chemical

Can any of the company-specific risk be diversified away by investing in both Chinese Universe and Wuxi Chemical 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 Chinese Universe and Wuxi Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chinese Universe Publishing and Wuxi Chemical Equipment, you can compare the effects of market volatilities on Chinese Universe and Wuxi Chemical 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 Chinese Universe with a short position of Wuxi Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinese Universe and Wuxi Chemical.

Diversification Opportunities for Chinese Universe and Wuxi Chemical

-0.74

Correlation Coefficient

Chinese Universe  Wuxi Chemical

Pay attention - limited upside

The 3 months correlation between Chinese and Wuxi is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Universe Publishing and Wuxi Chemical Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuxi Chemical Equipment and Chinese Universe 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 Chinese Universe Publishing are associated (or correlated) with Wuxi Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuxi Chemical Equipment has no effect on the direction of Chinese Universe i.e., Chinese Universe and Wuxi Chemical go up and down completely randomly.

Pair Corralation between Chinese Universe and Wuxi Chemical

Assuming the 90 days trading horizon Chinese Universe is expected to generate 19.25 times less return on investment than Wuxi Chemical. But when comparing it to its historical volatility, Chinese Universe Publishing is 1.12 times less risky than Wuxi Chemical. It trades about 0.0 of its potential returns per unit of risk. Wuxi Chemical Equipment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,443  in Wuxi Chemical Equipment on October 9, 2024 and sell it today you would lose (105.00) from holding Wuxi Chemical Equipment or give up 3.05% of portfolio value over 90 days.

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

Chinese Universe Publishing  vs.  Wuxi Chemical Equipment

Chinese Universe Pub

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Universe Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Wuxi Chemical Equipment

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wuxi Chemical Equipment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuxi Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chinese Universe and Wuxi Chemical

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

The idea behind Chinese Universe Publishing and Wuxi Chemical Equipment 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.