Correlation Between ChemoMetec and TROPHY GAMES

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

By analyzing existing cross correlation between ChemoMetec AS and TROPHY GAMES Development, you can compare the effects of market volatilities on ChemoMetec and TROPHY GAMES 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 ChemoMetec with a short position of TROPHY GAMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChemoMetec and TROPHY GAMES.

Diversification Opportunities for ChemoMetec and TROPHY GAMES

-0.64

Correlation Coefficient

ChemoMetec  TROPHY GAMES

Excellent diversification

The 3 months correlation between ChemoMetec and TROPHY is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding ChemoMetec AS and TROPHY GAMES Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TROPHY GAMES Development and ChemoMetec 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 ChemoMetec AS are associated (or correlated) with TROPHY GAMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TROPHY GAMES Development has no effect on the direction of ChemoMetec i.e., ChemoMetec and TROPHY GAMES go up and down completely randomly.

Pair Corralation between ChemoMetec and TROPHY GAMES

Assuming the 90 days trading horizon ChemoMetec AS is expected to generate 2.13 times more return on investment than TROPHY GAMES. However, ChemoMetec is 2.13 times more volatile than TROPHY GAMES Development. It trades about 0.15 of its potential returns per unit of risk. TROPHY GAMES Development is currently generating about -0.22 per unit of risk. If you would invest  38,800  in ChemoMetec AS on October 6, 2024 and sell it today you would earn a total of  11,350  from holding ChemoMetec AS or generate 29.25% return on investment over 90 days.

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

ChemoMetec AS  vs.  TROPHY GAMES Development

ChemoMetec AS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChemoMetec AS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, ChemoMetec exhibited solid returns over the last few months and may actually be approaching a breakup point.

TROPHY GAMES Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TROPHY GAMES Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ChemoMetec and TROPHY GAMES

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

The idea behind ChemoMetec AS and TROPHY GAMES Development 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.