Correlation Between Chongqing Machinery and AWILCO DRILLING

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

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

Diversification Opportunities for Chongqing Machinery and AWILCO DRILLING

0.15

Correlation Coefficient

Chongqing Machinery  AWILCO DRILLING

Average diversification

The 3 months correlation between Chongqing and AWILCO is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and AWILCO DRILLING PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AWILCO DRILLING PLC and Chongqing Machinery 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 Chongqing Machinery Electric are associated (or correlated) with AWILCO DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AWILCO DRILLING PLC has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and AWILCO DRILLING go up and down completely randomly.

Pair Corralation between Chongqing Machinery and AWILCO DRILLING

Assuming the 90 days horizon Chongqing Machinery is expected to generate 1.38 times less return on investment than AWILCO DRILLING. But when comparing it to its historical volatility, Chongqing Machinery Electric is 2.28 times less risky than AWILCO DRILLING. It trades about 0.06 of its potential returns per unit of risk. AWILCO DRILLING PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  256.00  in AWILCO DRILLING PLC on October 26, 2024 and sell it today you would lose (68.00) from holding AWILCO DRILLING PLC or give up 26.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Chongqing Machinery Electric  vs.  AWILCO DRILLING PLC

Chongqing Machinery

Risk-Adjusted Performance

2 of 100

Weak

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

AWILCO DRILLING PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AWILCO DRILLING PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, AWILCO DRILLING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chongqing Machinery and AWILCO DRILLING

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

The idea behind Chongqing Machinery Electric and AWILCO DRILLING PLC 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 Stocks Directory module to find actively traded stocks across global markets.