Correlation Between Chongqing Machinery and WESTERN DIGITAL

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

Diversification Opportunities for Chongqing Machinery and WESTERN DIGITAL

-0.84

Correlation Coefficient

Chongqing Machinery  WESTERN DIGITAL

Pay attention - limited upside

The 3 months correlation between Chongqing and WESTERN is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL 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 WESTERN DIGITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN DIGITAL has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and WESTERN DIGITAL go up and down completely randomly.

Pair Corralation between Chongqing Machinery and WESTERN DIGITAL

Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 3.44 times more return on investment than WESTERN DIGITAL. However, Chongqing Machinery is 3.44 times more volatile than WESTERN DIGITAL. It trades about 0.1 of its potential returns per unit of risk. WESTERN DIGITAL is currently generating about -0.13 per unit of risk. If you would invest  8.10  in Chongqing Machinery Electric on December 23, 2024 and sell it today you would earn a total of  2.90  from holding Chongqing Machinery Electric or generate 35.8% return on investment over 90 days.

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

Chongqing Machinery Electric  vs.  WESTERN DIGITAL

Chongqing Machinery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 7 (%) 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.

WESTERN DIGITAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days WESTERN DIGITAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Chongqing Machinery and WESTERN DIGITAL

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

The idea behind Chongqing Machinery Electric and WESTERN DIGITAL 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.