Correlation Between Chin Yang and Homecast CoLtd

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

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

Diversification Opportunities for Chin Yang and Homecast CoLtd

0.41

Correlation Coefficient

Chin Yang  Homecast CoLtd

Very weak diversification

The 3 months correlation between Chin and Homecast is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Chin Yang Chemical and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd and Chin Yang 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 Chin Yang Chemical are associated (or correlated) with Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of Chin Yang i.e., Chin Yang and Homecast CoLtd go up and down completely randomly.

Pair Corralation between Chin Yang and Homecast CoLtd

Assuming the 90 days trading horizon Chin Yang Chemical is expected to generate 1.11 times more return on investment than Homecast CoLtd. However, Chin Yang is 1.11 times more volatile than Homecast CoLtd. It trades about -0.07 of its potential returns per unit of risk. Homecast CoLtd is currently generating about -0.08 per unit of risk. If you would invest  257,463  in Chin Yang Chemical on September 5, 2024 and sell it today you would lose (30,463) from holding Chin Yang Chemical or give up 11.83% of portfolio value over 90 days.

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

Chin Yang Chemical  vs.  Homecast CoLtd

Chin Yang Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chin Yang Chemical 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.

Homecast CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homecast CoLtd 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 Chin Yang and Homecast CoLtd

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

The idea behind Chin Yang Chemical and Homecast CoLtd 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.