Correlation Between ALERION CLEANPOWER and Chongqing Machinery

Can any of the company-specific risk be diversified away by investing in both ALERION CLEANPOWER and Chongqing Machinery 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 ALERION CLEANPOWER and Chongqing Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALERION CLEANPOWER and Chongqing Machinery Electric, you can compare the effects of market volatilities on ALERION CLEANPOWER and Chongqing Machinery 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 ALERION CLEANPOWER with a short position of Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALERION CLEANPOWER and Chongqing Machinery.

Diversification Opportunities for ALERION CLEANPOWER and Chongqing Machinery

0.14

Correlation Coefficient

ALERION CLEANPOWER  Chongqing Machinery

Average diversification

The 3 months correlation between ALERION and Chongqing is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding ALERION CLEANPOWER and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery and ALERION CLEANPOWER 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 ALERION CLEANPOWER are associated (or correlated) with Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of ALERION CLEANPOWER i.e., ALERION CLEANPOWER and Chongqing Machinery go up and down completely randomly.

Pair Corralation between ALERION CLEANPOWER and Chongqing Machinery

Assuming the 90 days trading horizon ALERION CLEANPOWER is expected to generate 50.44 times less return on investment than Chongqing Machinery. But when comparing it to its historical volatility, ALERION CLEANPOWER is 1.83 times less risky than Chongqing Machinery. It trades about 0.0 of its potential returns per unit of risk. Chongqing Machinery Electric is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7.25  in Chongqing Machinery Electric on October 20, 2024 and sell it today you would earn a total of  1.15  from holding Chongqing Machinery Electric or generate 15.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

ALERION CLEANPOWER  vs.  Chongqing Machinery Electric

ALERION CLEANPOWER

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with ALERION CLEANPOWER and Chongqing Machinery

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

The idea behind ALERION CLEANPOWER and Chongqing Machinery Electric 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 CEOs Directory module to screen CEOs from public companies around the world.