Correlation Between INTER CARS and China BlueChemical

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

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

Diversification Opportunities for INTER CARS and China BlueChemical

0.53

Correlation Coefficient

INTER CARS  China BlueChemical

Very weak diversification

The 3 months correlation between INTER and China is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding INTER CARS SA and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical and INTER CARS 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 INTER CARS SA are associated (or correlated) with China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of INTER CARS i.e., INTER CARS and China BlueChemical go up and down completely randomly.

Pair Corralation between INTER CARS and China BlueChemical

Assuming the 90 days horizon INTER CARS is expected to generate 46.52 times less return on investment than China BlueChemical. But when comparing it to its historical volatility, INTER CARS SA is 1.88 times less risky than China BlueChemical. It trades about 0.0 of its potential returns per unit of risk. China BlueChemical is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  27.00  in China BlueChemical on October 7, 2024 and sell it today you would earn a total of  1.00  from holding China BlueChemical or generate 3.7% return on investment over 90 days.

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

INTER CARS SA  vs.  China BlueChemical

INTER CARS SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, INTER CARS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China BlueChemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China BlueChemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with INTER CARS and China BlueChemical

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

The idea behind INTER CARS SA and China BlueChemical 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .