Correlation Between Motorcar Parts and CGN Mining

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

By analyzing existing cross correlation between Motorcar Parts of and CGN Mining, you can compare the effects of market volatilities on Motorcar Parts and CGN Mining 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 Motorcar Parts with a short position of CGN Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Motorcar Parts and CGN Mining.

Diversification Opportunities for Motorcar Parts and CGN Mining

0.49

Correlation Coefficient

Motorcar Parts  CGN Mining

Very weak diversification

The 3 months correlation between Motorcar and CGN is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Motorcar Parts of and CGN Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGN Mining and Motorcar Parts 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 Motorcar Parts of are associated (or correlated) with CGN Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGN Mining has no effect on the direction of Motorcar Parts i.e., Motorcar Parts and CGN Mining go up and down completely randomly.

Pair Corralation between Motorcar Parts and CGN Mining

Given the investment horizon of 90 days Motorcar Parts of is expected to under-perform the CGN Mining. In addition to that, Motorcar Parts is 1.0 times more volatile than CGN Mining. It trades about -0.05 of its total potential returns per unit of risk. CGN Mining is currently generating about 0.02 per unit of volatility. If you would invest  11.00  in CGN Mining on January 26, 2024 and sell it today you would earn a total of  0.00  from holding CGN Mining or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	29.19%
Values	Daily Returns

Motorcar Parts of  vs.  CGN Mining

Motorcar Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Motorcar Parts of 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 somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

CGN Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CGN Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, CGN Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Motorcar Parts and CGN Mining

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

The idea behind Motorcar Parts of and CGN Mining 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..