Correlation Between Chesapeake Granite and Premier Polyfilm

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

By analyzing existing cross correlation between Chesapeake Granite Wash and Premier Polyfilm Limited, you can compare the effects of market volatilities on Chesapeake Granite and Premier Polyfilm 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 Chesapeake Granite with a short position of Premier Polyfilm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Granite and Premier Polyfilm.

Diversification Opportunities for Chesapeake Granite and Premier Polyfilm

0.65

Correlation Coefficient

Chesapeake Granite  Premier Polyfilm

Poor diversification

The 3 months correlation between Chesapeake and Premier is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Granite Wash and Premier Polyfilm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Polyfilm and Chesapeake Granite 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 Chesapeake Granite Wash are associated (or correlated) with Premier Polyfilm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Polyfilm has no effect on the direction of Chesapeake Granite i.e., Chesapeake Granite and Premier Polyfilm go up and down completely randomly.

Pair Corralation between Chesapeake Granite and Premier Polyfilm

Given the investment horizon of 90 days Chesapeake Granite is expected to generate 3.83 times less return on investment than Premier Polyfilm. But when comparing it to its historical volatility, Chesapeake Granite Wash is 2.26 times less risky than Premier Polyfilm. It trades about 0.06 of its potential returns per unit of risk. Premier Polyfilm Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,934  in Premier Polyfilm Limited on October 4, 2024 and sell it today you would earn a total of  6,178  from holding Premier Polyfilm Limited or generate 319.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	27.27%
Values	Daily Returns

Chesapeake Granite Wash  vs.  Premier Polyfilm Limited

Chesapeake Granite Wash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Granite Wash has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Chesapeake Granite is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Premier Polyfilm

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Polyfilm Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Premier Polyfilm reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chesapeake Granite and Premier Polyfilm

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

The idea behind Chesapeake Granite Wash and Premier Polyfilm Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.