Correlation Between Chongqing Machinery and CENTURIA OFFICE

Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery and CENTURIA OFFICE 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 CENTURIA OFFICE 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 CENTURIA OFFICE REIT, you can compare the effects of market volatilities on Chongqing Machinery and CENTURIA OFFICE 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 CENTURIA OFFICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and CENTURIA OFFICE.

Diversification Opportunities for Chongqing Machinery and CENTURIA OFFICE

-0.19

Correlation Coefficient

Chongqing Machinery  CENTURIA OFFICE

Good diversification

The 3 months correlation between Chongqing and CENTURIA is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and CENTURIA OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CENTURIA OFFICE REIT 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 CENTURIA OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CENTURIA OFFICE REIT has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and CENTURIA OFFICE go up and down completely randomly.

Pair Corralation between Chongqing Machinery and CENTURIA OFFICE

Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 1.92 times more return on investment than CENTURIA OFFICE. However, Chongqing Machinery is 1.92 times more volatile than CENTURIA OFFICE REIT. It trades about 0.09 of its potential returns per unit of risk. CENTURIA OFFICE REIT is currently generating about -0.2 per unit of risk. If you would invest  7.50  in Chongqing Machinery Electric on September 22, 2024 and sell it today you would earn a total of  0.40  from holding Chongqing Machinery Electric or generate 5.33% return on investment over 90 days.

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

Chongqing Machinery Electric  vs.  CENTURIA OFFICE REIT

Chongqing Machinery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chongqing Machinery reported solid returns over the last few months and may actually be approaching a breakup point.

CENTURIA OFFICE REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CENTURIA OFFICE REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CENTURIA OFFICE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chongqing Machinery and CENTURIA OFFICE

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

The idea behind Chongqing Machinery Electric and CENTURIA OFFICE REIT 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..