Correlation Between PlayNitride and Cheng Mei

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

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

Diversification Opportunities for PlayNitride and Cheng Mei

-0.62

Correlation Coefficient

PlayNitride  Cheng Mei

Excellent diversification

The 3 months correlation between PlayNitride and Cheng is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding PlayNitride and Cheng Mei Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Mei Materials and PlayNitride 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 PlayNitride are associated (or correlated) with Cheng Mei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Mei Materials has no effect on the direction of PlayNitride i.e., PlayNitride and Cheng Mei go up and down completely randomly.

Pair Corralation between PlayNitride and Cheng Mei

Assuming the 90 days trading horizon PlayNitride is expected to generate 3.86 times more return on investment than Cheng Mei. However, PlayNitride is 3.86 times more volatile than Cheng Mei Materials. It trades about 0.25 of its potential returns per unit of risk. Cheng Mei Materials is currently generating about -0.05 per unit of risk. If you would invest  8,620  in PlayNitride on September 15, 2024 and sell it today you would earn a total of  8,180  from holding PlayNitride or generate 94.9% return on investment over 90 days.

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

PlayNitride  vs.  Cheng Mei Materials

PlayNitride

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PlayNitride are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PlayNitride showed solid returns over the last few months and may actually be approaching a breakup point.

Cheng Mei Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheng Mei Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cheng Mei 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 PlayNitride and Cheng Mei

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

The idea behind PlayNitride and Cheng Mei Materials 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.