Correlation Between Chongqing Machinery and United States

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

Diversification Opportunities for Chongqing Machinery and United States

-0.21

Correlation Coefficient

Chongqing Machinery  United States

Very good diversification

The 3 months correlation between Chongqing and United is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and United States go up and down completely randomly.

Pair Corralation between Chongqing Machinery and United States

Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 0.84 times more return on investment than United States. However, Chongqing Machinery Electric is 1.19 times less risky than United States. It trades about 0.08 of its potential returns per unit of risk. United States Steel is currently generating about -0.02 per unit of risk. If you would invest  7.60  in Chongqing Machinery Electric on October 8, 2024 and sell it today you would earn a total of  0.90  from holding Chongqing Machinery Electric or generate 11.84% return on investment over 90 days.

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

Chongqing Machinery Electric  vs.  United States Steel

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.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United States is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chongqing Machinery and United States

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

The idea behind Chongqing Machinery Electric and United States Steel 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.