Correlation Between Chung Hung and Mechema Chemicals

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

By analyzing existing cross correlation between Chung Hung Steel and Mechema Chemicals Int, you can compare the effects of market volatilities on Chung Hung and Mechema Chemicals 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 Hung with a short position of Mechema Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hung and Mechema Chemicals.

Diversification Opportunities for Chung Hung and Mechema Chemicals

-0.27

Correlation Coefficient

Chung Hung  Mechema Chemicals

Very good diversification

The 3 months correlation between Chung and Mechema is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel and Mechema Chemicals Int in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mechema Chemicals Int and Chung Hung 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 Hung Steel are associated (or correlated) with Mechema Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mechema Chemicals Int has no effect on the direction of Chung Hung i.e., Chung Hung and Mechema Chemicals go up and down completely randomly.

Pair Corralation between Chung Hung and Mechema Chemicals

Assuming the 90 days trading horizon Chung Hung Steel is expected to under-perform the Mechema Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hung Steel is 1.11 times less risky than Mechema Chemicals. The stock trades about -0.22 of its potential returns per unit of risk. The Mechema Chemicals Int is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,950  in Mechema Chemicals Int on September 19, 2024 and sell it today you would earn a total of  120.00  from holding Mechema Chemicals Int or generate 1.73% return on investment over 90 days.

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

Chung Hung Steel  vs.  Mechema Chemicals Int

Chung Hung Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mechema Chemicals Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mechema Chemicals Int has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mechema Chemicals 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 Hung and Mechema Chemicals

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

The idea behind Chung Hung Steel and Mechema Chemicals Int 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.