Correlation Between Chengtun Mining and Masterwork Machinery

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

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

Diversification Opportunities for Chengtun Mining and Masterwork Machinery

0.56

Correlation Coefficient

Chengtun Mining  Masterwork Machinery

Very weak diversification

The 3 months correlation between Chengtun and Masterwork is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chengtun Mining Group and Masterwork Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterwork Machinery and Chengtun Mining 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 Chengtun Mining Group 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 Chengtun Mining i.e., Chengtun Mining and Masterwork Machinery go up and down completely randomly.

Pair Corralation between Chengtun Mining and Masterwork Machinery

Assuming the 90 days trading horizon Chengtun Mining Group is expected to generate 0.58 times more return on investment than Masterwork Machinery. However, Chengtun Mining Group is 1.74 times less risky than Masterwork Machinery. It trades about 0.21 of its potential returns per unit of risk. Masterwork Machinery is currently generating about 0.08 per unit of risk. If you would invest  468.00  in Chengtun Mining Group on December 26, 2024 and sell it today you would earn a total of  134.00  from holding Chengtun Mining Group or generate 28.63% return on investment over 90 days.

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

Chengtun Mining Group  vs.  Masterwork Machinery

Chengtun Mining Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chengtun Mining Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chengtun Mining sustained solid returns over the last few months and may actually be approaching a breakup point.

Masterwork Machinery

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Masterwork Machinery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Masterwork Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chengtun Mining and Masterwork Machinery

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

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.