Correlation Between Chumpower Machinery and ALFORMER Industrial

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

Diversification Opportunities for Chumpower Machinery and ALFORMER Industrial

-0.29

Correlation Coefficient

Chumpower Machinery  ALFORMER Industrial

Very good diversification

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

Pair Corralation between Chumpower Machinery and ALFORMER Industrial

Assuming the 90 days trading horizon Chumpower Machinery Corp is expected to generate 0.64 times more return on investment than ALFORMER Industrial. However, Chumpower Machinery Corp is 1.55 times less risky than ALFORMER Industrial. It trades about 0.13 of its potential returns per unit of risk. ALFORMER Industrial Co is currently generating about -0.02 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Chumpower Machinery Corp  vs.  ALFORMER Industrial Co

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.

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.

Pair Trading with Chumpower Machinery and ALFORMER Industrial

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

The idea behind Chumpower Machinery Corp and ALFORMER Industrial 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.