Correlation Between Chongqing Machinery and Singapore Reinsurance

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

Diversification Opportunities for Chongqing Machinery and Singapore Reinsurance

0.48

Correlation Coefficient

Chongqing Machinery  Singapore Reinsurance

Very weak diversification

The 3 months correlation between Chongqing and Singapore is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Singapore Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Reinsurance 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 Singapore Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Reinsurance has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and Singapore Reinsurance go up and down completely randomly.

Pair Corralation between Chongqing Machinery and Singapore Reinsurance

Assuming the 90 days horizon Chongqing Machinery Electric is expected to under-perform the Singapore Reinsurance. In addition to that, Chongqing Machinery is 2.5 times more volatile than Singapore Reinsurance. It trades about -0.09 of its total potential returns per unit of risk. Singapore Reinsurance is currently generating about 0.17 per unit of volatility. If you would invest  3,500  in Singapore Reinsurance on October 9, 2024 and sell it today you would earn a total of  120.00  from holding Singapore Reinsurance or generate 3.43% return on investment over 90 days.

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

Chongqing Machinery Electric  vs.  Singapore Reinsurance

Chongqing Machinery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chongqing Machinery reported solid returns over the last few months and may actually be approaching a breakup point.

Singapore Reinsurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Reinsurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Singapore Reinsurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chongqing Machinery and Singapore Reinsurance

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

The idea behind Chongqing Machinery Electric and Singapore Reinsurance 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.