Correlation Between Chernan Metal and Bin Chuan

Can any of the company-specific risk be diversified away by investing in both Chernan Metal and Bin Chuan 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 Bin Chuan 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 Bin Chuan Enterprise, you can compare the effects of market volatilities on Chernan Metal and Bin Chuan 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 Bin Chuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chernan Metal and Bin Chuan.

Diversification Opportunities for Chernan Metal and Bin Chuan

0.57

Correlation Coefficient

Chernan Metal  Bin Chuan

Very weak diversification

The 3 months correlation between Chernan and Bin is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Chernan Metal Industrial and Bin Chuan Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bin Chuan Enterprise 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 Bin Chuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bin Chuan Enterprise has no effect on the direction of Chernan Metal i.e., Chernan Metal and Bin Chuan go up and down completely randomly.

Pair Corralation between Chernan Metal and Bin Chuan

Assuming the 90 days trading horizon Chernan Metal is expected to generate 10.98 times less return on investment than Bin Chuan. But when comparing it to its historical volatility, Chernan Metal Industrial is 1.94 times less risky than Bin Chuan. It trades about 0.02 of its potential returns per unit of risk. Bin Chuan Enterprise is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,480  in Bin Chuan Enterprise on December 4, 2024 and sell it today you would earn a total of  1,920  from holding Bin Chuan Enterprise or generate 29.63% return on investment over 90 days.

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

Chernan Metal Industrial  vs.  Bin Chuan Enterprise

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.

Bin Chuan Enterprise

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bin Chuan Enterprise are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bin Chuan showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chernan Metal and Bin Chuan

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

The idea behind Chernan Metal Industrial and Bin Chuan Enterprise 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.