Correlation Between Chongqing Machinery and H FARM

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

Diversification Opportunities for Chongqing Machinery and H FARM

-0.41

Correlation Coefficient

Chongqing Machinery  H FARM

Very good diversification

The 3 months correlation between Chongqing and 5JQ is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and H FARM SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H FARM SPA 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 H FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H FARM SPA has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and H FARM go up and down completely randomly.

Pair Corralation between Chongqing Machinery and H FARM

Assuming the 90 days horizon Chongqing Machinery is expected to generate 1.08 times less return on investment than H FARM. But when comparing it to its historical volatility, Chongqing Machinery Electric is 1.36 times less risky than H FARM. It trades about 0.15 of its potential returns per unit of risk. H FARM SPA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  11.00  in H FARM SPA on September 28, 2024 and sell it today you would earn a total of  1.00  from holding H FARM SPA or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Chongqing Machinery Electric  vs.  H FARM SPA

Chongqing Machinery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chongqing Machinery may actually be approaching a critical reversion point that can send shares even higher in January 2025.

H FARM SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H FARM SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Chongqing Machinery and H FARM

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

The idea behind Chongqing Machinery Electric and H FARM SPA 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.