Correlation Between EV Advanced and ChipsMedia

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

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

Diversification Opportunities for EV Advanced and ChipsMedia

-0.27

Correlation Coefficient

EV Advanced  ChipsMedia

Very good diversification

The 3 months correlation between 131400 and ChipsMedia is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding EV Advanced Material and ChipsMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChipsMedia and EV Advanced 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 EV Advanced Material 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 EV Advanced i.e., EV Advanced and ChipsMedia go up and down completely randomly.

Pair Corralation between EV Advanced and ChipsMedia

Assuming the 90 days trading horizon EV Advanced is expected to generate 11.55 times less return on investment than ChipsMedia. But when comparing it to its historical volatility, EV Advanced Material is 2.28 times less risky than ChipsMedia. It trades about 0.03 of its potential returns per unit of risk. ChipsMedia is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,629,000  in ChipsMedia on October 20, 2024 and sell it today you would earn a total of  233,000  from holding ChipsMedia or generate 14.3% return on investment over 90 days.

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

EV Advanced Material  vs.  ChipsMedia

EV Advanced Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EV Advanced Material 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ChipsMedia

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChipsMedia are ranked lower than 10 (%) 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.

Pair Trading with EV Advanced and ChipsMedia

The main advantage of trading using opposite EV Advanced and ChipsMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EV Advanced 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 EV Advanced Material 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.