Correlation Between Great China and Macroblock

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

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

Diversification Opportunities for Great China and Macroblock

0.34

Correlation Coefficient

Great China  Macroblock

Weak diversification

The 3 months correlation between Great and Macroblock is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Great China Metal and Macroblock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macroblock and Great China 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 Great China Metal are associated (or correlated) with Macroblock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macroblock has no effect on the direction of Great China i.e., Great China and Macroblock go up and down completely randomly.

Pair Corralation between Great China and Macroblock

Assuming the 90 days trading horizon Great China Metal is expected to generate 0.16 times more return on investment than Macroblock. However, Great China Metal is 6.34 times less risky than Macroblock. It trades about 0.0 of its potential returns per unit of risk. Macroblock is currently generating about -0.07 per unit of risk. If you would invest  2,295  in Great China Metal on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Great China Metal or generate 0.0% return on investment over 90 days.

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

Great China Metal  vs.  Macroblock

Great China Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great China Metal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Great China is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Macroblock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macroblock has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Great China and Macroblock

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

The idea behind Great China Metal and Macroblock 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.