Correlation Between CDTi Advanced and China Natural

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Can any of the company-specific risk be diversified away by investing in both CDTi Advanced and China Natural 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 CDTi Advanced and China Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDTi Advanced Materials and China Natural Resources, you can compare the effects of market volatilities on CDTi Advanced and China Natural 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 CDTi Advanced with a short position of China Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDTi Advanced and China Natural.

Diversification Opportunities for CDTi Advanced and China Natural

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between CDTi and China is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding CDTi Advanced Materials and China Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Natural Resources and CDTi Advanced 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 CDTi Advanced Materials are associated (or correlated) with China Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Natural Resources has no effect on the direction of CDTi Advanced i.e., CDTi Advanced and China Natural go up and down completely randomly.

Pair Corralation between CDTi Advanced and China Natural

Given the investment horizon of 90 days CDTi Advanced is expected to generate 3.44 times less return on investment than China Natural. But when comparing it to its historical volatility, CDTi Advanced Materials is 3.54 times less risky than China Natural. It trades about 0.02 of its potential returns per unit of risk. China Natural Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  339.00  in China Natural Resources on December 29, 2023 and sell it today you would lose (219.00) from holding China Natural Resources or give up 64.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy2.08%
ValuesDaily Returns

CDTi Advanced Materials  vs.  China Natural Resources

 Performance 
       Timeline  
CDTi Advanced Materials 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days CDTi Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CDTi Advanced is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
China Natural Resources 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in China Natural Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, China Natural reported solid returns over the last few months and may actually be approaching a breakup point.

CDTi Advanced and China Natural Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CDTi Advanced and China Natural

The main advantage of trading using opposite CDTi Advanced and China Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDTi Advanced position performs unexpectedly, China Natural 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 Natural will offset losses from the drop in China Natural's long position.
The idea behind CDTi Advanced Materials and China Natural Resources 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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