Correlation Between China Water and Platinum Investment

Can any of the company-specific risk be diversified away by investing in both China Water and Platinum Investment 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 China Water and Platinum Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Water Affairs and Platinum Investment Management, you can compare the effects of market volatilities on China Water and Platinum Investment 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 China Water with a short position of Platinum Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Water and Platinum Investment.

Diversification Opportunities for China Water and Platinum Investment

0.1

Correlation Coefficient

China Water  Platinum Investment

Average diversification

The 3 months correlation between China and Platinum is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding China Water Affairs and Platinum Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Investment and China Water 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 China Water Affairs are associated (or correlated) with Platinum Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Investment has no effect on the direction of China Water i.e., China Water and Platinum Investment go up and down completely randomly.

Pair Corralation between China Water and Platinum Investment

Assuming the 90 days trading horizon China Water Affairs is expected to generate 1.34 times more return on investment than Platinum Investment. However, China Water is 1.34 times more volatile than Platinum Investment Management. It trades about 0.06 of its potential returns per unit of risk. Platinum Investment Management is currently generating about -0.02 per unit of risk. If you would invest  26.00  in China Water Affairs on October 3, 2024 and sell it today you would earn a total of  37.00  from holding China Water Affairs or generate 142.31% return on investment over 90 days.

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

China Water Affairs  vs.  Platinum Investment Management

China Water Affairs

Risk-Adjusted Performance

1 of 100

Weak

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

Platinum Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Platinum Investment Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with China Water and Platinum Investment

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

The idea behind China Water Affairs and Platinum Investment Management 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.