Correlation Between Chialin Precision and Chernan Metal

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

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

Diversification Opportunities for Chialin Precision and Chernan Metal

-0.59

Correlation Coefficient

Chialin Precision  Chernan Metal

Excellent diversification

The 3 months correlation between Chialin and Chernan is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Chialin Precision Industrial and Chernan Metal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chernan Metal Industrial and Chialin Precision 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 Chialin Precision Industrial are associated (or correlated) with Chernan Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chernan Metal Industrial has no effect on the direction of Chialin Precision i.e., Chialin Precision and Chernan Metal go up and down completely randomly.

Pair Corralation between Chialin Precision and Chernan Metal

Assuming the 90 days trading horizon Chialin Precision Industrial is expected to under-perform the Chernan Metal. But the stock apears to be less risky and, when comparing its historical volatility, Chialin Precision Industrial is 2.07 times less risky than Chernan Metal. The stock trades about -0.05 of its potential returns per unit of risk. The Chernan Metal Industrial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,485  in Chernan Metal Industrial on December 24, 2024 and sell it today you would earn a total of  35.00  from holding Chernan Metal Industrial or generate 1.0% return on investment over 90 days.

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

Chialin Precision Industrial  vs.  Chernan Metal Industrial

Chialin Precision

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chialin Precision Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chialin Precision is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chernan Metal Industrial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chernan Metal Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chernan Metal 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 Chialin Precision and Chernan Metal

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

The idea behind Chialin Precision Industrial and Chernan Metal Industrial 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.