Correlation Between ChipsMedia and HMM

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

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

Diversification Opportunities for ChipsMedia and HMM

0.45

Correlation Coefficient

ChipsMedia  HMM

Very weak diversification

The 3 months correlation between ChipsMedia and HMM is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ChipsMedia and HMM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMM Co and ChipsMedia 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 ChipsMedia are associated (or correlated) with HMM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMM Co has no effect on the direction of ChipsMedia i.e., ChipsMedia and HMM go up and down completely randomly.

Pair Corralation between ChipsMedia and HMM

Assuming the 90 days trading horizon ChipsMedia is expected to generate 1.86 times more return on investment than HMM. However, ChipsMedia is 1.86 times more volatile than HMM Co. It trades about 0.15 of its potential returns per unit of risk. HMM Co is currently generating about 0.1 per unit of risk. If you would invest  1,300,000  in ChipsMedia on October 22, 2024 and sell it today you would earn a total of  562,000  from holding ChipsMedia or generate 43.23% return on investment over 90 days.

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

ChipsMedia  vs.  HMM Co

ChipsMedia

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChipsMedia are ranked lower than 12 (%) 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.

HMM Co

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HMM Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HMM sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChipsMedia and HMM

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

The idea behind ChipsMedia and HMM Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.