Correlation Between Choil Aluminum and Ecoplastic

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

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

Diversification Opportunities for Choil Aluminum and Ecoplastic

0.79

Correlation Coefficient

Choil Aluminum  Ecoplastic

Poor diversification

The 3 months correlation between Choil and Ecoplastic is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Choil Aluminum and Ecoplastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecoplastic and Choil Aluminum 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 Choil Aluminum are associated (or correlated) with Ecoplastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecoplastic has no effect on the direction of Choil Aluminum i.e., Choil Aluminum and Ecoplastic go up and down completely randomly.

Pair Corralation between Choil Aluminum and Ecoplastic

Assuming the 90 days trading horizon Choil Aluminum is expected to generate 0.83 times more return on investment than Ecoplastic. However, Choil Aluminum is 1.21 times less risky than Ecoplastic. It trades about 0.3 of its potential returns per unit of risk. Ecoplastic is currently generating about 0.13 per unit of risk. If you would invest  143,000  in Choil Aluminum on October 25, 2024 and sell it today you would earn a total of  9,700  from holding Choil Aluminum or generate 6.78% return on investment over 90 days.

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

Choil Aluminum  vs.  Ecoplastic

Choil Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ecoplastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecoplastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Choil Aluminum and Ecoplastic

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

The idea behind Choil Aluminum and Ecoplastic 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.