Correlation Between Chahua Modern and HMTNew Technical

Can any of the company-specific risk be diversified away by investing in both Chahua Modern and HMTNew Technical 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 Chahua Modern and HMTNew Technical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chahua Modern Housewares and HMTNew Technical, you can compare the effects of market volatilities on Chahua Modern and HMTNew Technical 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 Chahua Modern with a short position of HMTNew Technical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chahua Modern and HMTNew Technical.

Diversification Opportunities for Chahua Modern and HMTNew Technical

0.17

Correlation Coefficient

Chahua Modern  HMTNew Technical

Average diversification

The 3 months correlation between Chahua and HMTNew is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Chahua Modern Housewares and HMTNew Technical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMTNew Technical and Chahua Modern 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 Chahua Modern Housewares are associated (or correlated) with HMTNew Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMTNew Technical has no effect on the direction of Chahua Modern i.e., Chahua Modern and HMTNew Technical go up and down completely randomly.

Pair Corralation between Chahua Modern and HMTNew Technical

Assuming the 90 days trading horizon Chahua Modern Housewares is expected to generate 1.06 times more return on investment than HMTNew Technical. However, Chahua Modern is 1.06 times more volatile than HMTNew Technical. It trades about 0.07 of its potential returns per unit of risk. HMTNew Technical is currently generating about 0.04 per unit of risk. If you would invest  944.00  in Chahua Modern Housewares on October 22, 2024 and sell it today you would earn a total of  1,149  from holding Chahua Modern Housewares or generate 121.72% return on investment over 90 days.

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

Chahua Modern Housewares  vs.  HMTNew Technical

Chahua Modern Housewares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chahua Modern Housewares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chahua Modern may actually be approaching a critical reversion point that can send shares even higher in February 2025.

HMTNew Technical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HMTNew Technical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HMTNew Technical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chahua Modern and HMTNew Technical

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

The idea behind Chahua Modern Housewares and HMTNew Technical 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.