Correlation Between Newretail and Chumpower Machinery

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

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

Diversification Opportunities for Newretail and Chumpower Machinery

-0.5

Correlation Coefficient

Newretail  Chumpower Machinery

Very good diversification

The 3 months correlation between Newretail and Chumpower is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Newretail Co and Chumpower Machinery Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chumpower Machinery Corp and Newretail 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 Newretail Co are associated (or correlated) with Chumpower Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chumpower Machinery Corp has no effect on the direction of Newretail i.e., Newretail and Chumpower Machinery go up and down completely randomly.

Pair Corralation between Newretail and Chumpower Machinery

Assuming the 90 days trading horizon Newretail Co is expected to under-perform the Chumpower Machinery. In addition to that, Newretail is 1.82 times more volatile than Chumpower Machinery Corp. It trades about -0.18 of its total potential returns per unit of risk. Chumpower Machinery Corp is currently generating about 0.09 per unit of volatility. If you would invest  2,130  in Chumpower Machinery Corp on September 19, 2024 and sell it today you would earn a total of  50.00  from holding Chumpower Machinery Corp or generate 2.35% return on investment over 90 days.

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

Newretail Co  vs.  Chumpower Machinery Corp

Newretail

Risk-Adjusted Performance

11 of 100

Good

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

Chumpower Machinery Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chumpower Machinery Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chumpower Machinery 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 Newretail and Chumpower Machinery

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

The idea behind Newretail Co and Chumpower Machinery Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.