Correlation Between Allmed Medical and Chahua Modern

Can any of the company-specific risk be diversified away by investing in both Allmed Medical and Chahua Modern 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 Allmed Medical and Chahua Modern into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allmed Medical Products and Chahua Modern Housewares, you can compare the effects of market volatilities on Allmed Medical and Chahua Modern 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 Allmed Medical with a short position of Chahua Modern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allmed Medical and Chahua Modern.

Diversification Opportunities for Allmed Medical and Chahua Modern

0.73

Correlation Coefficient

Allmed Medical  Chahua Modern

Poor diversification

The 3 months correlation between Allmed and Chahua is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Allmed Medical Products and Chahua Modern Housewares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chahua Modern Housewares and Allmed Medical 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 Allmed Medical Products are associated (or correlated) with Chahua Modern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chahua Modern Housewares has no effect on the direction of Allmed Medical i.e., Allmed Medical and Chahua Modern go up and down completely randomly.

Pair Corralation between Allmed Medical and Chahua Modern

Assuming the 90 days trading horizon Allmed Medical Products is expected to under-perform the Chahua Modern. But the stock apears to be less risky and, when comparing its historical volatility, Allmed Medical Products is 1.78 times less risky than Chahua Modern. The stock trades about -0.11 of its potential returns per unit of risk. The Chahua Modern Housewares is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,206  in Chahua Modern Housewares on October 3, 2024 and sell it today you would earn a total of  82.00  from holding Chahua Modern Housewares or generate 3.72% return on investment over 90 days.

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

Allmed Medical Products  vs.  Chahua Modern Housewares

Allmed Medical Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allmed Medical Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Allmed Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chahua Modern Housewares

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chahua Modern Housewares are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chahua Modern sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allmed Medical and Chahua Modern

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

The idea behind Allmed Medical Products and Chahua Modern Housewares 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.