Correlation Between Chumpower Machinery and Golden Friends

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

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

Diversification Opportunities for Chumpower Machinery and Golden Friends

0.74

Correlation Coefficient

Chumpower Machinery  Golden Friends

Poor diversification

The 3 months correlation between Chumpower and Golden is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Chumpower Machinery Corp and Golden Friends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Friends and Chumpower Machinery 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 Chumpower Machinery Corp are associated (or correlated) with Golden Friends. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Friends has no effect on the direction of Chumpower Machinery i.e., Chumpower Machinery and Golden Friends go up and down completely randomly.

Pair Corralation between Chumpower Machinery and Golden Friends

Assuming the 90 days trading horizon Chumpower Machinery Corp is expected to generate 1.8 times more return on investment than Golden Friends. However, Chumpower Machinery is 1.8 times more volatile than Golden Friends. It trades about 0.13 of its potential returns per unit of risk. Golden Friends is currently generating about 0.09 per unit of risk. 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Chumpower Machinery Corp  vs.  Golden Friends

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.

Golden Friends

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Friends are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Golden Friends 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 Chumpower Machinery and Golden Friends

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

The idea behind Chumpower Machinery Corp and Golden Friends 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.