Correlation Between Chernan Metal and Wonderful

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

Diversification Opportunities for Chernan Metal and Wonderful

0.32

Correlation Coefficient

Chernan Metal  Wonderful

Weak diversification

The 3 months correlation between Chernan and Wonderful is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Chernan Metal Industrial and Wonderful Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonderful Hi Tech 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 Wonderful. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonderful Hi Tech has no effect on the direction of Chernan Metal i.e., Chernan Metal and Wonderful go up and down completely randomly.

Pair Corralation between Chernan Metal and Wonderful

Assuming the 90 days trading horizon Chernan Metal Industrial is expected to generate 1.23 times more return on investment than Wonderful. However, Chernan Metal is 1.23 times more volatile than Wonderful Hi Tech Co. It trades about 0.04 of its potential returns per unit of risk. Wonderful Hi Tech Co is currently generating about 0.04 per unit of risk. If you would invest  2,860  in Chernan Metal Industrial on October 27, 2024 and sell it today you would earn a total of  765.00  from holding Chernan Metal Industrial or generate 26.75% return on investment over 90 days.

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

Chernan Metal Industrial  vs.  Wonderful Hi Tech 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.

Wonderful Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Chernan Metal Industrial and Wonderful Hi Tech 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.