Correlation Between China BlueChemical and Ringmetall

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

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

Diversification Opportunities for China BlueChemical and Ringmetall

-0.05

Correlation Coefficient

China BlueChemical  Ringmetall

Good diversification

The 3 months correlation between China and Ringmetall is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and Ringmetall SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ringmetall SE 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 Ringmetall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ringmetall SE has no effect on the direction of China BlueChemical i.e., China BlueChemical and Ringmetall go up and down completely randomly.

Pair Corralation between China BlueChemical and Ringmetall

Assuming the 90 days horizon China BlueChemical is expected to generate 2.94 times less return on investment than Ringmetall. But when comparing it to its historical volatility, China BlueChemical is 1.12 times less risky than Ringmetall. It trades about 0.02 of its potential returns per unit of risk. Ringmetall SE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  333.00  in Ringmetall SE on December 23, 2024 and sell it today you would earn a total of  17.00  from holding Ringmetall SE or generate 5.11% return on investment over 90 days.

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

China BlueChemical  vs.  Ringmetall SE

China BlueChemical

Risk-Adjusted Performance

Weak

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

Ringmetall SE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ringmetall SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ringmetall may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China BlueChemical and Ringmetall

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

The idea behind China BlueChemical and Ringmetall SE 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.