Correlation Between Giant Manufacturing and Chia Chang

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

By analyzing existing cross correlation between Giant Manufacturing Co and Chia Chang Co, you can compare the effects of market volatilities on Giant Manufacturing and Chia Chang 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 Giant Manufacturing with a short position of Chia Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Giant Manufacturing and Chia Chang.

Diversification Opportunities for Giant Manufacturing and Chia Chang

0.59

Correlation Coefficient

Giant Manufacturing  Chia Chang

Very weak diversification

The 3 months correlation between Giant and Chia is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Giant Manufacturing Co and Chia Chang Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Chang and Giant Manufacturing 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 Giant Manufacturing Co are associated (or correlated) with Chia Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Chang has no effect on the direction of Giant Manufacturing i.e., Giant Manufacturing and Chia Chang go up and down completely randomly.

Pair Corralation between Giant Manufacturing and Chia Chang

Assuming the 90 days trading horizon Giant Manufacturing Co is expected to generate 4.15 times more return on investment than Chia Chang. However, Giant Manufacturing is 4.15 times more volatile than Chia Chang Co. It trades about 0.02 of its potential returns per unit of risk. Chia Chang Co is currently generating about 0.02 per unit of risk. If you would invest  14,300  in Giant Manufacturing Co on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Giant Manufacturing Co or generate 0.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.25%
Values	Daily Returns

Giant Manufacturing Co  vs.  Chia Chang Co

Giant Manufacturing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Giant Manufacturing Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Giant Manufacturing is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chia Chang

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Chang Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chia Chang 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 Giant Manufacturing and Chia Chang

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

The idea behind Giant Manufacturing Co and Chia Chang Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.