Correlation Between Champion Microelectronic and Hu Lane

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

By analyzing existing cross correlation between Champion Microelectronic Corp and Hu Lane Associate, you can compare the effects of market volatilities on Champion Microelectronic and Hu Lane 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 Champion Microelectronic with a short position of Hu Lane. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Microelectronic and Hu Lane.

Diversification Opportunities for Champion Microelectronic and Hu Lane

-0.62

Correlation Coefficient

Champion Microelectronic  Hu Lane

Excellent diversification

The 3 months correlation between Champion and 6279 is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Champion Microelectronic Corp and Hu Lane Associate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hu Lane Associate and Champion Microelectronic 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 Champion Microelectronic Corp are associated (or correlated) with Hu Lane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hu Lane Associate has no effect on the direction of Champion Microelectronic i.e., Champion Microelectronic and Hu Lane go up and down completely randomly.

Pair Corralation between Champion Microelectronic and Hu Lane

Assuming the 90 days trading horizon Champion Microelectronic Corp is expected to generate 1.4 times more return on investment than Hu Lane. However, Champion Microelectronic is 1.4 times more volatile than Hu Lane Associate. It trades about 0.01 of its potential returns per unit of risk. Hu Lane Associate is currently generating about -0.05 per unit of risk. If you would invest  5,460  in Champion Microelectronic Corp on October 12, 2024 and sell it today you would lose (10.00) from holding Champion Microelectronic Corp or give up 0.18% of portfolio value over 90 days.

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

Champion Microelectronic Corp  vs.  Hu Lane Associate

Champion Microelectronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Microelectronic Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Hu Lane Associate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hu Lane Associate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hu Lane 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 Champion Microelectronic and Hu Lane

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

The idea behind Champion Microelectronic Corp and Hu Lane Associate 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.