Correlation Between Chongqing Machinery and Rock Tech

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

Diversification Opportunities for Chongqing Machinery and Rock Tech

-0.41
  Correlation Coefficient

Very good diversification

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

Pair Corralation between Chongqing Machinery and Rock Tech

Assuming the 90 days horizon Chongqing Machinery is expected to generate 4.89 times less return on investment than Rock Tech. But when comparing it to its historical volatility, Chongqing Machinery Electric is 2.77 times less risky than Rock Tech. It trades about 0.08 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  71.00  in Rock Tech Lithium on October 6, 2024 and sell it today you would earn a total of  12.00  from holding Rock Tech Lithium or generate 16.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Chongqing Machinery Electric  vs.  Rock Tech Lithium

 Performance 
       Timeline  
Chongqing Machinery 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Insignificant
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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.
Rock Tech Lithium 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Rock Tech Lithium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Rock Tech is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Chongqing Machinery and Rock Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chongqing Machinery and Rock Tech

The main advantage of trading using opposite Chongqing Machinery and Rock Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery position performs unexpectedly, Rock Tech 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 Rock Tech will offset losses from the drop in Rock Tech's long position.
The idea behind Chongqing Machinery Electric and Rock Tech Lithium 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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