Correlation Between Mobile Appliance and CKH Food

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

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

Diversification Opportunities for Mobile Appliance and CKH Food

0.72

Correlation Coefficient

Mobile Appliance  CKH Food

Poor diversification

The 3 months correlation between Mobile and CKH is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Mobile Appliance and CKH Food Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKH Food Health and Mobile Appliance 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 Mobile Appliance are associated (or correlated) with CKH Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKH Food Health has no effect on the direction of Mobile Appliance i.e., Mobile Appliance and CKH Food go up and down completely randomly.

Pair Corralation between Mobile Appliance and CKH Food

Assuming the 90 days trading horizon Mobile Appliance is expected to generate 1.48 times more return on investment than CKH Food. However, Mobile Appliance is 1.48 times more volatile than CKH Food Health. It trades about -0.02 of its potential returns per unit of risk. CKH Food Health is currently generating about -0.24 per unit of risk. If you would invest  209,000  in Mobile Appliance on October 1, 2024 and sell it today you would lose (10,000) from holding Mobile Appliance or give up 4.78% of portfolio value over 90 days.

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

Mobile Appliance  vs.  CKH Food Health

Mobile Appliance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mobile Appliance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CKH Food Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CKH Food Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Mobile Appliance and CKH Food

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

The idea behind Mobile Appliance and CKH Food Health 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.