Correlation Between Baotek Industrial and Chernan Metal

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

By analyzing existing cross correlation between Baotek Industrial Materials and Chernan Metal Industrial, you can compare the effects of market volatilities on Baotek Industrial and Chernan Metal 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 Baotek Industrial with a short position of Chernan Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baotek Industrial and Chernan Metal.

Diversification Opportunities for Baotek Industrial and Chernan Metal

0.66

Correlation Coefficient

Baotek Industrial  Chernan Metal

Poor diversification

The 3 months correlation between Baotek and Chernan is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Baotek Industrial Materials and Chernan Metal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chernan Metal Industrial and Baotek 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 Baotek Industrial Materials are associated (or correlated) with Chernan Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chernan Metal Industrial has no effect on the direction of Baotek Industrial i.e., Baotek Industrial and Chernan Metal go up and down completely randomly.

Pair Corralation between Baotek Industrial and Chernan Metal

Assuming the 90 days trading horizon Baotek Industrial Materials is expected to generate 1.01 times more return on investment than Chernan Metal. However, Baotek Industrial is 1.01 times more volatile than Chernan Metal Industrial. It trades about -0.12 of its potential returns per unit of risk. Chernan Metal Industrial is currently generating about -0.17 per unit of risk. If you would invest  4,440  in Baotek Industrial Materials on October 7, 2024 and sell it today you would lose (590.00) from holding Baotek Industrial Materials or give up 13.29% of portfolio value over 90 days.

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

Baotek Industrial Materials  vs.  Chernan Metal Industrial

Baotek Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baotek Industrial Materials 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.

Chernan Metal Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chernan Metal Industrial 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 Baotek Industrial and Chernan Metal

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

The idea behind Baotek Industrial Materials and Chernan Metal Industrial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.