Correlation Between China Yuchai and Curtiss Wright

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

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

Diversification Opportunities for China Yuchai and Curtiss Wright

-0.43

Correlation Coefficient

China Yuchai  Curtiss Wright

Very good diversification

The 3 months correlation between China and Curtiss is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Yuchai International and Curtiss Wright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Curtiss Wright and China Yuchai 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 Yuchai International are associated (or correlated) with Curtiss Wright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Curtiss Wright has no effect on the direction of China Yuchai i.e., China Yuchai and Curtiss Wright go up and down completely randomly.

Pair Corralation between China Yuchai and Curtiss Wright

Considering the 90-day investment horizon China Yuchai International is expected to under-perform the Curtiss Wright. In addition to that, China Yuchai is 1.65 times more volatile than Curtiss Wright. It trades about -0.01 of its total potential returns per unit of risk. Curtiss Wright is currently generating about 0.22 per unit of volatility. If you would invest  22,555  in Curtiss Wright on January 26, 2024 and sell it today you would earn a total of  2,709  from holding Curtiss Wright or generate 12.01% return on investment over 90 days.

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

China Yuchai International  vs.  Curtiss Wright

China Yuchai Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Yuchai International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, China Yuchai is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Curtiss Wright

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Curtiss Wright are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Curtiss Wright may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with China Yuchai and Curtiss Wright

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

The idea behind China Yuchai International and Curtiss Wright 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.