Correlation Between Chaheng Precision and Ares International

Can any of the company-specific risk be diversified away by investing in both Chaheng Precision and Ares International 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 Chaheng Precision and Ares International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chaheng Precision Co and Ares International Corp, you can compare the effects of market volatilities on Chaheng Precision and Ares International 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 Chaheng Precision with a short position of Ares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chaheng Precision and Ares International.

Diversification Opportunities for Chaheng Precision and Ares International

-0.1

Correlation Coefficient

Chaheng Precision  Ares International

Good diversification

The 3 months correlation between Chaheng and Ares is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Chaheng Precision Co and Ares International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares International Corp and Chaheng Precision 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 Chaheng Precision Co are associated (or correlated) with Ares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares International Corp has no effect on the direction of Chaheng Precision i.e., Chaheng Precision and Ares International go up and down completely randomly.

Pair Corralation between Chaheng Precision and Ares International

Assuming the 90 days trading horizon Chaheng Precision is expected to generate 2.25 times less return on investment than Ares International. But when comparing it to its historical volatility, Chaheng Precision Co is 1.2 times less risky than Ares International. It trades about 0.04 of its potential returns per unit of risk. Ares International Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,805  in Ares International Corp on September 22, 2024 and sell it today you would earn a total of  2,625  from holding Ares International Corp or generate 93.58% return on investment over 90 days.

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

Chaheng Precision Co  vs.  Ares International Corp

Chaheng Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chaheng Precision Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chaheng Precision is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Ares International Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ares International Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ares International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chaheng Precision and Ares International

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

The idea behind Chaheng Precision Co and Ares International Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .