Correlation Between Chernan Metal and Lemtech Holdings

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

Diversification Opportunities for Chernan Metal and Lemtech Holdings

-0.53

Correlation Coefficient

Chernan Metal  Lemtech Holdings

Excellent diversification

The 3 months correlation between Chernan and Lemtech is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Chernan Metal Industrial and Lemtech Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemtech Holdings 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 Lemtech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemtech Holdings has no effect on the direction of Chernan Metal i.e., Chernan Metal and Lemtech Holdings go up and down completely randomly.

Pair Corralation between Chernan Metal and Lemtech Holdings

Assuming the 90 days trading horizon Chernan Metal Industrial is expected to under-perform the Lemtech Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Chernan Metal Industrial is 1.18 times less risky than Lemtech Holdings. The stock trades about -0.09 of its potential returns per unit of risk. The Lemtech Holdings Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  10,300  in Lemtech Holdings Co on September 13, 2024 and sell it today you would earn a total of  2,900  from holding Lemtech Holdings Co or generate 28.16% return on investment over 90 days.

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

Chernan Metal Industrial  vs.  Lemtech Holdings 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 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.

Lemtech Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lemtech Holdings Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lemtech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chernan Metal and Lemtech Holdings

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

The idea behind Chernan Metal Industrial and Lemtech Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.