Correlation Between Heilongjiang Agriculture and Masterwork Machinery

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

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

Diversification Opportunities for Heilongjiang Agriculture and Masterwork Machinery

0.24

Correlation Coefficient

Heilongjiang Agriculture  Masterwork Machinery

Modest diversification

The 3 months correlation between Heilongjiang and Masterwork is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Heilongjiang Agriculture Co and Masterwork Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterwork Machinery and Heilongjiang Agriculture 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 Heilongjiang Agriculture Co 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 Heilongjiang Agriculture i.e., Heilongjiang Agriculture and Masterwork Machinery go up and down completely randomly.

Pair Corralation between Heilongjiang Agriculture and Masterwork Machinery

Assuming the 90 days trading horizon Heilongjiang Agriculture Co is expected to under-perform the Masterwork Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Heilongjiang Agriculture Co is 2.54 times less risky than Masterwork Machinery. The stock trades about -0.04 of its potential returns per unit of risk. The Masterwork Machinery is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  534.00  in Masterwork Machinery on October 22, 2024 and sell it today you would earn a total of  23.00  from holding Masterwork Machinery or generate 4.31% return on investment over 90 days.

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

Heilongjiang Agriculture Co  vs.  Masterwork Machinery

Heilongjiang Agriculture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heilongjiang Agriculture Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Heilongjiang Agriculture is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Masterwork Machinery

Risk-Adjusted Performance

2 of 100

Insignificant

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 Heilongjiang Agriculture and Masterwork Machinery

The main advantage of trading using opposite Heilongjiang Agriculture and Masterwork Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heilongjiang Agriculture 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 Heilongjiang Agriculture Co 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.