Correlation Between Chongqing Machinery and Truist Financial

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

Diversification Opportunities for Chongqing Machinery and Truist Financial

0.32

Correlation Coefficient

Chongqing Machinery  Truist Financial

Weak diversification

The 3 months correlation between Chongqing and Truist is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial 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 Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and Truist Financial go up and down completely randomly.

Pair Corralation between Chongqing Machinery and Truist Financial

Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 1.17 times more return on investment than Truist Financial. However, Chongqing Machinery is 1.17 times more volatile than Truist Financial. It trades about 0.11 of its potential returns per unit of risk. Truist Financial is currently generating about 0.12 per unit of risk. If you would invest  7.65  in Chongqing Machinery Electric on October 6, 2024 and sell it today you would earn a total of  0.85  from holding Chongqing Machinery Electric or generate 11.11% return on investment over 90 days.

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

Chongqing Machinery Electric  vs.  Truist Financial

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 stable basic indicators, Chongqing Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Truist Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Truist Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chongqing Machinery and Truist Financial

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

The idea behind Chongqing Machinery Electric and Truist Financial 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.