Correlation Between CVD Equipment and Weichai Power

Can any of the company-specific risk be diversified away by investing in both CVD Equipment and Weichai Power 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 CVD Equipment and Weichai Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVD Equipment and Weichai Power, you can compare the effects of market volatilities on CVD Equipment and Weichai Power 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 CVD Equipment with a short position of Weichai Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVD Equipment and Weichai Power.

Diversification Opportunities for CVD Equipment and Weichai Power

0.26

Correlation Coefficient

CVD Equipment  Weichai Power

Modest diversification

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

Pair Corralation between CVD Equipment and Weichai Power

If you would invest  1,126  in Weichai Power on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Weichai Power or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

CVD Equipment  vs.  Weichai Power

CVD Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVD Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Weichai Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weichai Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Weichai Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CVD Equipment and Weichai Power

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

The idea behind CVD Equipment and Weichai Power 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.