Correlation Between China BlueChemical and SIERRA METALS

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

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

Diversification Opportunities for China BlueChemical and SIERRA METALS

0.23

Correlation Coefficient

China BlueChemical  SIERRA METALS

Modest diversification

The 3 months correlation between China and SIERRA is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and SIERRA METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIERRA METALS and China BlueChemical 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 BlueChemical are associated (or correlated) with SIERRA METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIERRA METALS has no effect on the direction of China BlueChemical i.e., China BlueChemical and SIERRA METALS go up and down completely randomly.

Pair Corralation between China BlueChemical and SIERRA METALS

Assuming the 90 days horizon China BlueChemical is expected to generate 2.17 times less return on investment than SIERRA METALS. But when comparing it to its historical volatility, China BlueChemical is 1.31 times less risky than SIERRA METALS. It trades about 0.03 of its potential returns per unit of risk. SIERRA METALS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  27.00  in SIERRA METALS on October 10, 2024 and sell it today you would earn a total of  26.00  from holding SIERRA METALS or generate 96.3% return on investment over 90 days.

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

China BlueChemical  vs.  SIERRA METALS

China BlueChemical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China BlueChemical reported solid returns over the last few months and may actually be approaching a breakup point.

SIERRA METALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIERRA METALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIERRA METALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with China BlueChemical and SIERRA METALS

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

The idea behind China BlueChemical and SIERRA METALS 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.