Correlation Between Chongqing Machinery and Capital One

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

Diversification Opportunities for Chongqing Machinery and Capital One

0.47

Correlation Coefficient

Chongqing Machinery  Capital One

Very weak diversification

The 3 months correlation between Chongqing and Capital is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and Capital One go up and down completely randomly.

Pair Corralation between Chongqing Machinery and Capital One

Assuming the 90 days horizon Chongqing Machinery Electric is expected to under-perform the Capital One. In addition to that, Chongqing Machinery is 2.02 times more volatile than Capital One Financial. It trades about -0.15 of its total potential returns per unit of risk. Capital One Financial is currently generating about -0.01 per unit of volatility. If you would invest  17,700  in Capital One Financial on October 10, 2024 and sell it today you would lose (100.00) from holding Capital One Financial or give up 0.56% 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.  Capital One Financial

Chongqing Machinery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 3 (%) 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.

Capital One Financial

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Chongqing Machinery and Capital One

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

The idea behind Chongqing Machinery Electric and Capital One 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.