Correlation Between Chenming Mold and Promise Technology

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

By analyzing existing cross correlation between Chenming Mold Industrial and Promise Technology, you can compare the effects of market volatilities on Chenming Mold and Promise Technology 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 Chenming Mold with a short position of Promise Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chenming Mold and Promise Technology.

Diversification Opportunities for Chenming Mold and Promise Technology

0.46

Correlation Coefficient

Chenming Mold  Promise Technology

Very weak diversification

The 3 months correlation between Chenming and Promise is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Chenming Mold Industrial and Promise Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Promise Technology and Chenming Mold 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 Chenming Mold Industrial are associated (or correlated) with Promise Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Promise Technology has no effect on the direction of Chenming Mold i.e., Chenming Mold and Promise Technology go up and down completely randomly.

Pair Corralation between Chenming Mold and Promise Technology

Assuming the 90 days trading horizon Chenming Mold Industrial is expected to generate 3.0 times more return on investment than Promise Technology. However, Chenming Mold is 3.0 times more volatile than Promise Technology. It trades about 0.14 of its potential returns per unit of risk. Promise Technology is currently generating about -0.02 per unit of risk. If you would invest  10,900  in Chenming Mold Industrial on September 13, 2024 and sell it today you would earn a total of  3,600  from holding Chenming Mold Industrial or generate 33.03% return on investment over 90 days.

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

Chenming Mold Industrial  vs.  Promise Technology

Chenming Mold Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chenming Mold Industrial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chenming Mold showed solid returns over the last few months and may actually be approaching a breakup point.

Promise Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Promise Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Promise Technology 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 Chenming Mold and Promise Technology

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

The idea behind Chenming Mold Industrial and Promise Technology 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.