Correlation Between Chunbo and LIG ES

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

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

Diversification Opportunities for Chunbo and LIG ES

0.95

Correlation Coefficient

Chunbo  LIG ES

Almost no diversification

The 3 months correlation between Chunbo and LIG is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Chunbo Co and LIG ES SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIG ES SPAC and Chunbo 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 Chunbo Co are associated (or correlated) with LIG ES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIG ES SPAC has no effect on the direction of Chunbo i.e., Chunbo and LIG ES go up and down completely randomly.

Pair Corralation between Chunbo and LIG ES

Assuming the 90 days trading horizon Chunbo Co is expected to generate 1.43 times more return on investment than LIG ES. However, Chunbo is 1.43 times more volatile than LIG ES SPAC. It trades about -0.13 of its potential returns per unit of risk. LIG ES SPAC is currently generating about -0.24 per unit of risk. If you would invest  6,080,000  in Chunbo Co on August 31, 2024 and sell it today you would lose (1,750,000) from holding Chunbo Co or give up 28.78% of portfolio value over 90 days.

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

Chunbo Co  vs.  LIG ES SPAC

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

LIG ES SPAC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LIG ES SPAC 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Chunbo and LIG ES

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

The idea behind Chunbo Co and LIG ES SPAC 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.