Correlation Between Ecopro BM and Chunbo

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

By analyzing existing cross correlation between Ecopro BM Co and Chunbo Co, you can compare the effects of market volatilities on Ecopro BM and Chunbo 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 Ecopro BM with a short position of Chunbo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecopro BM and Chunbo.

Diversification Opportunities for Ecopro BM and Chunbo

0.94

Correlation Coefficient

Ecopro BM  Chunbo

Almost no diversification

The 3 months correlation between Ecopro and Chunbo is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Ecopro BM Co and Chunbo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunbo and Ecopro BM 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 Ecopro BM Co are associated (or correlated) with Chunbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunbo has no effect on the direction of Ecopro BM i.e., Ecopro BM and Chunbo go up and down completely randomly.

Pair Corralation between Ecopro BM and Chunbo

Assuming the 90 days trading horizon Ecopro BM Co is expected to generate 1.0 times more return on investment than Chunbo. However, Ecopro BM is 1.0 times more volatile than Chunbo Co. It trades about -0.08 of its potential returns per unit of risk. Chunbo Co is currently generating about -0.12 per unit of risk. If you would invest  17,030,000  in Ecopro BM Co on September 4, 2024 and sell it today you would lose (3,280,000) from holding Ecopro BM Co or give up 19.26% of portfolio value over 90 days.

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

Ecopro BM Co  vs.  Chunbo Co

Ecopro BM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecopro BM Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Chunbo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chunbo Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ecopro BM and Chunbo

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

The idea behind Ecopro BM Co and Chunbo Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.