Correlation Between Mechema Chemicals and Feng Ching

Can any of the company-specific risk be diversified away by investing in both Mechema Chemicals and Feng Ching 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 Mechema Chemicals and Feng Ching into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mechema Chemicals Int and Feng Ching Metal, you can compare the effects of market volatilities on Mechema Chemicals and Feng Ching 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 Mechema Chemicals with a short position of Feng Ching. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mechema Chemicals and Feng Ching.

Diversification Opportunities for Mechema Chemicals and Feng Ching

0.73

Correlation Coefficient

Mechema Chemicals  Feng Ching

Poor diversification

The 3 months correlation between Mechema and Feng is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Mechema Chemicals Int and Feng Ching Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Feng Ching Metal and Mechema Chemicals 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 Mechema Chemicals Int are associated (or correlated) with Feng Ching. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Feng Ching Metal has no effect on the direction of Mechema Chemicals i.e., Mechema Chemicals and Feng Ching go up and down completely randomly.

Pair Corralation between Mechema Chemicals and Feng Ching

Assuming the 90 days trading horizon Mechema Chemicals Int is expected to under-perform the Feng Ching. But the stock apears to be less risky and, when comparing its historical volatility, Mechema Chemicals Int is 1.32 times less risky than Feng Ching. The stock trades about -0.39 of its potential returns per unit of risk. The Feng Ching Metal is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,835  in Feng Ching Metal on October 25, 2024 and sell it today you would lose (30.00) from holding Feng Ching Metal or give up 1.63% of portfolio value over 90 days.

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

Mechema Chemicals Int  vs.  Feng Ching Metal

Mechema Chemicals Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mechema Chemicals Int has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Feng Ching Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Feng Ching Metal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Mechema Chemicals and Feng Ching

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

The idea behind Mechema Chemicals Int and Feng Ching Metal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.