Correlation Between Chernan Metal and Hi Lai

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

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

Diversification Opportunities for Chernan Metal and Hi Lai

0.72

Correlation Coefficient

Chernan Metal  Hi Lai

Poor diversification

The 3 months correlation between Chernan and 1268 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chernan Metal Industrial and Hi Lai Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Lai Foods and Chernan Metal 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 Chernan Metal Industrial are associated (or correlated) with Hi Lai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Lai Foods has no effect on the direction of Chernan Metal i.e., Chernan Metal and Hi Lai go up and down completely randomly.

Pair Corralation between Chernan Metal and Hi Lai

Assuming the 90 days trading horizon Chernan Metal Industrial is expected to under-perform the Hi Lai. In addition to that, Chernan Metal is 3.95 times more volatile than Hi Lai Foods Co. It trades about -0.12 of its total potential returns per unit of risk. Hi Lai Foods Co is currently generating about -0.05 per unit of volatility. If you would invest  15,500  in Hi Lai Foods Co on October 24, 2024 and sell it today you would lose (300.00) from holding Hi Lai Foods Co or give up 1.94% of portfolio value over 90 days.

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

Chernan Metal Industrial  vs.  Hi Lai Foods Co

Chernan Metal Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chernan Metal Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Hi Lai Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hi Lai Foods Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hi Lai 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 Chernan Metal and Hi Lai

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

The idea behind Chernan Metal Industrial and Hi Lai Foods Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.