Correlation Between Metallurgical and China Sports

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

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

Diversification Opportunities for Metallurgical and China Sports

0.45

Correlation Coefficient

Metallurgical  China Sports

Very weak diversification

The 3 months correlation between Metallurgical and China is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Metallurgical of and China Sports Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Sports Industry and Metallurgical 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 Metallurgical of are associated (or correlated) with China Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Sports Industry has no effect on the direction of Metallurgical i.e., Metallurgical and China Sports go up and down completely randomly.

Pair Corralation between Metallurgical and China Sports

Assuming the 90 days trading horizon Metallurgical of is expected to generate 0.54 times more return on investment than China Sports. However, Metallurgical of is 1.84 times less risky than China Sports. It trades about -0.25 of its potential returns per unit of risk. China Sports Industry is currently generating about -0.47 per unit of risk. If you would invest  336.00  in Metallurgical of on October 17, 2024 and sell it today you would lose (25.00) from holding Metallurgical of or give up 7.44% of portfolio value over 90 days.

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

Metallurgical of  vs.  China Sports Industry

Metallurgical

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Sports Industry

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Sports Industry are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metallurgical and China Sports

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

The idea behind Metallurgical of and China Sports Industry 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.