Correlation Between Chia Yi and Chernan Metal

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

By analyzing existing cross correlation between Chia Yi Steel and Chernan Metal Industrial, you can compare the effects of market volatilities on Chia Yi and Chernan Metal 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 Chia Yi with a short position of Chernan Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia Yi and Chernan Metal.

Diversification Opportunities for Chia Yi and Chernan Metal

-0.13

Correlation Coefficient

Chia Yi  Chernan Metal

Good diversification

The 3 months correlation between Chia and Chernan is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Chia Yi Steel and Chernan Metal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chernan Metal Industrial and Chia Yi 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 Chia Yi Steel are associated (or correlated) with Chernan Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chernan Metal Industrial has no effect on the direction of Chia Yi i.e., Chia Yi and Chernan Metal go up and down completely randomly.

Pair Corralation between Chia Yi and Chernan Metal

Assuming the 90 days trading horizon Chia Yi Steel is expected to under-perform the Chernan Metal. But the stock apears to be less risky and, when comparing its historical volatility, Chia Yi Steel is 1.95 times less risky than Chernan Metal. The stock trades about -0.19 of its potential returns per unit of risk. The Chernan Metal Industrial is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,530  in Chernan Metal Industrial on December 30, 2024 and sell it today you would lose (185.00) from holding Chernan Metal Industrial or give up 5.24% of portfolio value over 90 days.

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

Chia Yi Steel  vs.  Chernan Metal Industrial

Chia Yi Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chia Yi Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Chernan Metal Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chernan Metal Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chernan Metal 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 Chia Yi and Chernan Metal

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

The idea behind Chia Yi Steel and Chernan Metal 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.