Correlation Between Chongqing Machinery and Sanyo Chemical

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

Diversification Opportunities for Chongqing Machinery and Sanyo Chemical

-0.26

Correlation Coefficient

Chongqing Machinery  Sanyo Chemical

Very good diversification

The 3 months correlation between Chongqing and Sanyo is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Sanyo Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyo Chemical Industries 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 Sanyo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyo Chemical Industries has no effect on the direction of Chongqing Machinery i.e., Chongqing Machinery and Sanyo Chemical go up and down completely randomly.

Pair Corralation between Chongqing Machinery and Sanyo Chemical

Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 4.67 times more return on investment than Sanyo Chemical. However, Chongqing Machinery is 4.67 times more volatile than Sanyo Chemical Industries. It trades about 0.07 of its potential returns per unit of risk. Sanyo Chemical Industries is currently generating about -0.02 per unit of risk. If you would invest  2.39  in Chongqing Machinery Electric on October 19, 2024 and sell it today you would earn a total of  6.01  from holding Chongqing Machinery Electric or generate 251.46% 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.  Sanyo Chemical Industries

Chongqing Machinery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 5 (%) 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.

Sanyo Chemical Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chongqing Machinery and Sanyo Chemical

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

The idea behind Chongqing Machinery Electric and Sanyo Chemical Industries 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.