Correlation Between AVIC Heavy and Masterwork Machinery

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

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

Diversification Opportunities for AVIC Heavy and Masterwork Machinery

0.04

Correlation Coefficient

AVIC Heavy  Masterwork Machinery

Significant diversification

The 3 months correlation between AVIC and Masterwork is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AVIC Heavy Machinery and Masterwork Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masterwork Machinery and AVIC Heavy 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 AVIC Heavy Machinery 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 AVIC Heavy i.e., AVIC Heavy and Masterwork Machinery go up and down completely randomly.

Pair Corralation between AVIC Heavy and Masterwork Machinery

Assuming the 90 days trading horizon AVIC Heavy Machinery is expected to generate 0.67 times more return on investment than Masterwork Machinery. However, AVIC Heavy Machinery is 1.49 times less risky than Masterwork Machinery. It trades about -0.11 of its potential returns per unit of risk. Masterwork Machinery is currently generating about -0.09 per unit of risk. If you would invest  1,977  in AVIC Heavy Machinery on October 22, 2024 and sell it today you would lose (96.00) from holding AVIC Heavy Machinery or give up 4.86% of portfolio value over 90 days.

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

AVIC Heavy Machinery  vs.  Masterwork Machinery

AVIC Heavy Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVIC Heavy Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 AVIC Heavy and Masterwork Machinery

The main advantage of trading using opposite AVIC Heavy and Masterwork Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVIC Heavy 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 AVIC Heavy Machinery 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.