Correlation Between Chernan Metal and Group Up

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

Diversification Opportunities for Chernan Metal and Group Up

0.29

Correlation Coefficient

Chernan Metal  Group Up

Modest diversification

The 3 months correlation between Chernan and Group is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Chernan Metal Industrial and Group Up Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group Up Industrial 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 Group Up. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group Up Industrial has no effect on the direction of Chernan Metal i.e., Chernan Metal and Group Up go up and down completely randomly.

Pair Corralation between Chernan Metal and Group Up

Assuming the 90 days trading horizon Chernan Metal Industrial is expected to generate 1.22 times more return on investment than Group Up. However, Chernan Metal is 1.22 times more volatile than Group Up Industrial. It trades about 0.02 of its potential returns per unit of risk. Group Up Industrial is currently generating about -0.08 per unit of risk. If you would invest  4,035  in Chernan Metal Industrial on December 5, 2024 and sell it today you would earn a total of  30.00  from holding Chernan Metal Industrial or generate 0.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.21%
Values	Daily Returns

Chernan Metal Industrial  vs.  Group Up Industrial

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.

Group Up Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Group Up 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.

Pair Trading with Chernan Metal and Group Up

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

The idea behind Chernan Metal Industrial and Group Up 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.