Correlation Between Cloud Air and ChipsMedia

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

Diversification Opportunities for Cloud Air and ChipsMedia

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cloud and ChipsMedia is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cloud Air CoLtd and ChipsMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChipsMedia and Cloud Air 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 Cloud Air CoLtd are associated (or correlated) with ChipsMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChipsMedia has no effect on the direction of Cloud Air i.e., Cloud Air and ChipsMedia go up and down completely randomly.

Pair Corralation between Cloud Air and ChipsMedia

Assuming the 90 days trading horizon Cloud Air CoLtd is expected to under-perform the ChipsMedia. But the stock apears to be less risky and, when comparing its historical volatility, Cloud Air CoLtd is 2.06 times less risky than ChipsMedia. The stock trades about -0.01 of its potential returns per unit of risk. The ChipsMedia is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,451,000  in ChipsMedia on October 12, 2024 and sell it today you would earn a total of  174,000  from holding ChipsMedia or generate 11.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Cloud Air CoLtd  vs.  ChipsMedia

 Performance 
       Timeline  
Cloud Air CoLtd 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ChipsMedia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ChipsMedia sustained solid returns over the last few months and may actually be approaching a breakup point.

Cloud Air and ChipsMedia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cloud Air and ChipsMedia

The main advantage of trading using opposite Cloud Air and ChipsMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cloud Air position performs unexpectedly, ChipsMedia 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 ChipsMedia will offset losses from the drop in ChipsMedia's long position.
The idea behind Cloud Air CoLtd and ChipsMedia 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 CEOs Directory module to screen CEOs from public companies around the world.

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