Correlation Between Chun Yuan and Tehmag Foods

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

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

Diversification Opportunities for Chun Yuan and Tehmag Foods

-0.02

Correlation Coefficient

Chun Yuan  Tehmag Foods

Good diversification

The 3 months correlation between Chun and Tehmag is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Chun Yuan Steel and Tehmag Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tehmag Foods and Chun Yuan 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 Chun Yuan Steel are associated (or correlated) with Tehmag Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tehmag Foods has no effect on the direction of Chun Yuan i.e., Chun Yuan and Tehmag Foods go up and down completely randomly.

Pair Corralation between Chun Yuan and Tehmag Foods

Assuming the 90 days trading horizon Chun Yuan Steel is expected to under-perform the Tehmag Foods. In addition to that, Chun Yuan is 2.12 times more volatile than Tehmag Foods. It trades about -0.14 of its total potential returns per unit of risk. Tehmag Foods is currently generating about 0.28 per unit of volatility. If you would invest  30,450  in Tehmag Foods on September 24, 2024 and sell it today you would earn a total of  750.00  from holding Tehmag Foods or generate 2.46% return on investment over 90 days.

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

Chun Yuan Steel  vs.  Tehmag Foods

Chun Yuan Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chun Yuan Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chun Yuan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tehmag Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tehmag Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tehmag Foods 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 Chun Yuan and Tehmag Foods

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

The idea behind Chun Yuan Steel and Tehmag Foods 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.