Correlation Between Chongqing Machinery and Casio Computer

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

Diversification Opportunities for Chongqing Machinery and Casio Computer

0.57

Correlation Coefficient

Chongqing Machinery  Casio Computer

Very weak diversification

The 3 months correlation between Chongqing and Casio is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Casio Computer CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casio Computer CoLtd 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 Casio Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casio Computer CoLtd has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and Casio Computer go up and down completely randomly.

Pair Corralation between Chongqing Machinery and Casio Computer

Assuming the 90 days horizon Chongqing Machinery Electric is expected to under-perform the Casio Computer. In addition to that, Chongqing Machinery is 2.12 times more volatile than Casio Computer CoLtd. It trades about -0.02 of its total potential returns per unit of risk. Casio Computer CoLtd is currently generating about -0.03 per unit of volatility. If you would invest  781.00  in Casio Computer CoLtd on October 11, 2024 and sell it today you would lose (8.00) from holding Casio Computer CoLtd or give up 1.02% of portfolio value over 90 days.

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

Chongqing Machinery Electric  vs.  Casio Computer CoLtd

Chongqing Machinery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 4 (%) 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 February 2025.

Casio Computer CoLtd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Casio Computer CoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Casio Computer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chongqing Machinery and Casio Computer

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

The idea behind Chongqing Machinery Electric and Casio Computer CoLtd 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .