Correlation Between Platinum Investment and Chongqing Machinery

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

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

Diversification Opportunities for Platinum Investment and Chongqing Machinery

-0.37

Correlation Coefficient

Platinum Investment  Chongqing Machinery

Very good diversification

The 3 months correlation between Platinum and Chongqing is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Platinum Investment Management and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery and Platinum Investment 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 Platinum Investment Management 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 Platinum Investment i.e., Platinum Investment and Chongqing Machinery go up and down completely randomly.

Pair Corralation between Platinum Investment and Chongqing Machinery

Assuming the 90 days horizon Platinum Investment Management is expected to under-perform the Chongqing Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Platinum Investment Management is 1.63 times less risky than Chongqing Machinery. The stock trades about -0.03 of its potential returns per unit of risk. The Chongqing Machinery Electric is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7.20  in Chongqing Machinery Electric on October 25, 2024 and sell it today you would lose (0.05) from holding Chongqing Machinery Electric or give up 0.69% of portfolio value over 90 days.

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

Platinum Investment Management  vs.  Chongqing Machinery Electric

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Chongqing Machinery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Machinery Electric are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chongqing Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Platinum Investment and Chongqing Machinery

The main advantage of trading using opposite Platinum Investment and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Platinum Investment 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 Platinum Investment Management 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .