Correlation Between Cheng Mei and First Copper

Can any of the company-specific risk be diversified away by investing in both Cheng Mei and First Copper 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 Cheng Mei and First Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cheng Mei Materials and First Copper Technology, you can compare the effects of market volatilities on Cheng Mei and First Copper 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 Cheng Mei with a short position of First Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Mei and First Copper.

Diversification Opportunities for Cheng Mei and First Copper

0.3

Correlation Coefficient

Cheng Mei  First Copper

Weak diversification

The 3 months correlation between Cheng and First is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Mei Materials and First Copper Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Copper Technology and Cheng Mei 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 Cheng Mei Materials are associated (or correlated) with First Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Copper Technology has no effect on the direction of Cheng Mei i.e., Cheng Mei and First Copper go up and down completely randomly.

Pair Corralation between Cheng Mei and First Copper

Assuming the 90 days trading horizon Cheng Mei Materials is expected to under-perform the First Copper. But the stock apears to be less risky and, when comparing its historical volatility, Cheng Mei Materials is 3.96 times less risky than First Copper. The stock trades about -0.11 of its potential returns per unit of risk. The First Copper Technology is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,665  in First Copper Technology on December 4, 2024 and sell it today you would earn a total of  425.00  from holding First Copper Technology or generate 11.6% return on investment over 90 days.

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

Cheng Mei Materials  vs.  First Copper Technology

Cheng Mei Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Mei Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cheng Mei may actually be approaching a critical reversion point that can send shares even higher in April 2025.

First Copper Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Copper Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, First Copper may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cheng Mei and First Copper

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

The idea behind Cheng Mei Materials and First Copper Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.