Correlation Between Chun Yuan and Allied Industrial

Can any of the company-specific risk be diversified away by investing in both Chun Yuan and Allied Industrial 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 Allied Industrial 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 Allied Industrial, you can compare the effects of market volatilities on Chun Yuan and Allied Industrial 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 Allied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chun Yuan and Allied Industrial.

Diversification Opportunities for Chun Yuan and Allied Industrial

-0.53

Correlation Coefficient

Chun Yuan  Allied Industrial

Excellent diversification

The 3 months correlation between Chun and Allied is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Chun Yuan Steel and Allied Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Industrial 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 Allied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Industrial has no effect on the direction of Chun Yuan i.e., Chun Yuan and Allied Industrial go up and down completely randomly.

Pair Corralation between Chun Yuan and Allied Industrial

Assuming the 90 days trading horizon Chun Yuan Steel is expected to generate 0.92 times more return on investment than Allied Industrial. However, Chun Yuan Steel is 1.08 times less risky than Allied Industrial. It trades about 0.23 of its potential returns per unit of risk. Allied Industrial is currently generating about -0.1 per unit of risk. If you would invest  1,815  in Chun Yuan Steel on December 23, 2024 and sell it today you would earn a total of  285.00  from holding Chun Yuan Steel or generate 15.7% return on investment over 90 days.

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

Chun Yuan Steel  vs.  Allied Industrial

Chun Yuan Steel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chun Yuan Steel are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chun Yuan showed solid returns over the last few months and may actually be approaching a breakup point.

Allied Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allied Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Chun Yuan and Allied Industrial

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

The idea behind Chun Yuan Steel and Allied Industrial 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..