Correlation Between Crescent Star and Wah Nobel

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

By analyzing existing cross correlation between Crescent Star Insurance and Wah Nobel Chemicals, you can compare the effects of market volatilities on Crescent Star and Wah Nobel 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 Crescent Star with a short position of Wah Nobel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crescent Star and Wah Nobel.

Diversification Opportunities for Crescent Star and Wah Nobel

0.31

Correlation Coefficient

Crescent Star  Wah Nobel

Weak diversification

The 3 months correlation between Crescent and Wah is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Star Insurance and Wah Nobel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Nobel Chemicals and Crescent Star 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 Crescent Star Insurance are associated (or correlated) with Wah Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Nobel Chemicals has no effect on the direction of Crescent Star i.e., Crescent Star and Wah Nobel go up and down completely randomly.

Pair Corralation between Crescent Star and Wah Nobel

Assuming the 90 days trading horizon Crescent Star Insurance is expected to generate 2.45 times more return on investment than Wah Nobel. However, Crescent Star is 2.45 times more volatile than Wah Nobel Chemicals. It trades about 0.14 of its potential returns per unit of risk. Wah Nobel Chemicals is currently generating about 0.27 per unit of risk. If you would invest  280.00  in Crescent Star Insurance on September 17, 2024 and sell it today you would earn a total of  30.00  from holding Crescent Star Insurance or generate 10.71% return on investment over 90 days.

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

Crescent Star Insurance  vs.  Wah Nobel Chemicals

Crescent Star Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crescent Star Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Crescent Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wah Nobel Chemicals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Nobel Chemicals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wah Nobel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crescent Star and Wah Nobel

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

The idea behind Crescent Star Insurance and Wah Nobel Chemicals 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.