Correlation Between Platinum Investment and China Water

Can any of the company-specific risk be diversified away by investing in both Platinum Investment and China Water 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 China Water 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 China Water Affairs, you can compare the effects of market volatilities on Platinum Investment and China Water 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 China Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Platinum Investment and China Water.

Diversification Opportunities for Platinum Investment and China Water

0.06

Correlation Coefficient

Platinum Investment  China Water

Significant diversification

The 3 months correlation between Platinum and China is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Platinum Investment Management and China Water Affairs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Water Affairs 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 China Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Water Affairs has no effect on the direction of Platinum Investment i.e., Platinum Investment and China Water go up and down completely randomly.

Pair Corralation between Platinum Investment and China Water

Assuming the 90 days horizon Platinum Investment is expected to generate 3.08 times less return on investment than China Water. But when comparing it to its historical volatility, Platinum Investment Management is 1.43 times less risky than China Water. It trades about 0.06 of its potential returns per unit of risk. China Water Affairs is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  39.00  in China Water Affairs on October 3, 2024 and sell it today you would earn a total of  24.00  from holding China Water Affairs or generate 61.54% return on investment over 90 days.

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

Platinum Investment Management  vs.  China Water Affairs

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

China Water Affairs

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Platinum Investment and China Water

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

The idea behind Platinum Investment Management and China Water Affairs 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.