Correlation Between Chuangs China and Amcor Plc

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

By analyzing existing cross correlation between Chuangs China Investments and Amcor plc, you can compare the effects of market volatilities on Chuangs China and Amcor Plc 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 Chuangs China with a short position of Amcor Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chuangs China and Amcor Plc.

Diversification Opportunities for Chuangs China and Amcor Plc

0.08

Correlation Coefficient

Chuangs China  Amcor Plc

Significant diversification

The 3 months correlation between Chuangs and Amcor is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and Amcor plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcor plc and Chuangs China 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 Chuangs China Investments are associated (or correlated) with Amcor Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcor plc has no effect on the direction of Chuangs China i.e., Chuangs China and Amcor Plc go up and down completely randomly.

Pair Corralation between Chuangs China and Amcor Plc

Assuming the 90 days horizon Chuangs China Investments is expected to under-perform the Amcor Plc. In addition to that, Chuangs China is 2.18 times more volatile than Amcor plc. It trades about -0.01 of its total potential returns per unit of risk. Amcor plc is currently generating about 0.01 per unit of volatility. If you would invest  914.00  in Amcor plc on October 6, 2024 and sell it today you would lose (22.00) from holding Amcor plc or give up 2.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Chuangs China Investments  vs.  Amcor plc

Chuangs China Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chuangs China Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chuangs China is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Amcor plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amcor plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Chuangs China and Amcor Plc

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

The idea behind Chuangs China Investments and Amcor plc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.