Correlation Between Chayo Group and Power Solution

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

By analyzing existing cross correlation between Chayo Group Public and Power Solution Technologies, you can compare the effects of market volatilities on Chayo Group and Power Solution 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 Chayo Group with a short position of Power Solution. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chayo Group and Power Solution.

Diversification Opportunities for Chayo Group and Power Solution

-0.59

Correlation Coefficient

Chayo Group  Power Solution

Excellent diversification

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

Pair Corralation between Chayo Group and Power Solution

Assuming the 90 days trading horizon Chayo Group is expected to generate 12.18 times less return on investment than Power Solution. In addition to that, Chayo Group is 1.52 times more volatile than Power Solution Technologies. It trades about 0.0 of its total potential returns per unit of risk. Power Solution Technologies is currently generating about 0.06 per unit of volatility. If you would invest  48.00  in Power Solution Technologies on November 23, 2024 and sell it today you would earn a total of  1.00  from holding Power Solution Technologies or generate 2.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Chayo Group Public  vs.  Power Solution Technologies

Chayo Group Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chayo Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Power Solution Techn

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Solution Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Power Solution disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chayo Group and Power Solution

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

The idea behind Chayo Group Public and Power Solution Technologies 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.