Correlation Between Chung Fu and Mirle Automation

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

By analyzing existing cross correlation between Chung Fu Tex International and Mirle Automation Corp, you can compare the effects of market volatilities on Chung Fu and Mirle Automation 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 Chung Fu with a short position of Mirle Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Fu and Mirle Automation.

Diversification Opportunities for Chung Fu and Mirle Automation

0.65

Correlation Coefficient

Chung Fu  Mirle Automation

Poor diversification

The 3 months correlation between Chung and Mirle is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chung Fu Tex International and Mirle Automation Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mirle Automation Corp and Chung Fu 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 Chung Fu Tex International are associated (or correlated) with Mirle Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mirle Automation Corp has no effect on the direction of Chung Fu i.e., Chung Fu and Mirle Automation go up and down completely randomly.

Pair Corralation between Chung Fu and Mirle Automation

Assuming the 90 days trading horizon Chung Fu Tex International is expected to under-perform the Mirle Automation. In addition to that, Chung Fu is 1.09 times more volatile than Mirle Automation Corp. It trades about -0.03 of its total potential returns per unit of risk. Mirle Automation Corp is currently generating about -0.04 per unit of volatility. If you would invest  8,050  in Mirle Automation Corp on September 16, 2024 and sell it today you would lose (560.00) from holding Mirle Automation Corp or give up 6.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Chung Fu Tex International  vs.  Mirle Automation Corp

Chung Fu Tex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Fu Tex International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Fu is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mirle Automation Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mirle Automation Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mirle Automation is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chung Fu and Mirle Automation

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

The idea behind Chung Fu Tex International and Mirle Automation Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.