Correlation Between ALFORMER Industrial and Chumpower Machinery

Can any of the company-specific risk be diversified away by investing in both ALFORMER Industrial and Chumpower Machinery 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 ALFORMER Industrial and Chumpower Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for ALFORMER Industrial and Chumpower Machinery

-0.29

Correlation Coefficient

ALFORMER Industrial  Chumpower Machinery

Very good diversification

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

Pair Corralation between ALFORMER Industrial and Chumpower Machinery

Assuming the 90 days trading horizon ALFORMER Industrial Co is expected to under-perform the Chumpower Machinery. In addition to that, ALFORMER Industrial is 1.55 times more volatile than Chumpower Machinery Corp. It trades about -0.02 of its total potential returns per unit of risk. Chumpower Machinery Corp is currently generating about 0.13 per unit of volatility. If you would invest  2,180  in Chumpower Machinery Corp on December 26, 2024 and sell it today you would earn a total of  240.00  from holding Chumpower Machinery Corp or generate 11.01% return on investment over 90 days.

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

ALFORMER Industrial Co  vs.  Chumpower Machinery Corp

ALFORMER Industrial

Risk-Adjusted Performance

Very Weak

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

Chumpower Machinery Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chumpower Machinery Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chumpower Machinery showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALFORMER Industrial and Chumpower Machinery

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

The idea behind ALFORMER Industrial Co and Chumpower Machinery 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.