Correlation Between Panda Financial and China Nonferrous

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

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

Diversification Opportunities for Panda Financial and China Nonferrous

0.54

Correlation Coefficient

Panda Financial  China Nonferrous

Very weak diversification

The 3 months correlation between Panda and China is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Panda Financial Holding and China Nonferrous Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Nonferrous Metal and Panda Financial 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 Panda Financial Holding are associated (or correlated) with China Nonferrous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Nonferrous Metal has no effect on the direction of Panda Financial i.e., Panda Financial and China Nonferrous go up and down completely randomly.

Pair Corralation between Panda Financial and China Nonferrous

Assuming the 90 days trading horizon Panda Financial Holding is expected to generate 1.16 times more return on investment than China Nonferrous. However, Panda Financial is 1.16 times more volatile than China Nonferrous Metal. It trades about 0.13 of its potential returns per unit of risk. China Nonferrous Metal is currently generating about 0.01 per unit of risk. If you would invest  983.00  in Panda Financial Holding on September 19, 2024 and sell it today you would earn a total of  511.00  from holding Panda Financial Holding or generate 51.98% return on investment over 90 days.

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

Panda Financial Holding  vs.  China Nonferrous Metal

Panda Financial Holding

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Panda Financial Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Panda Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

China Nonferrous Metal

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Nonferrous Metal are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Nonferrous sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Panda Financial and China Nonferrous

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

The idea behind Panda Financial Holding and China Nonferrous 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.