Correlation Between Chuangs China and ArcBest

Can any of the company-specific risk be diversified away by investing in both Chuangs China and ArcBest 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 ArcBest 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 ArcBest, you can compare the effects of market volatilities on Chuangs China and ArcBest 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 ArcBest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chuangs China and ArcBest.

Diversification Opportunities for Chuangs China and ArcBest

-0.15

Correlation Coefficient

Chuangs China  ArcBest

Good diversification

The 3 months correlation between Chuangs and ArcBest is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and ArcBest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcBest 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 ArcBest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcBest has no effect on the direction of Chuangs China i.e., Chuangs China and ArcBest go up and down completely randomly.

Pair Corralation between Chuangs China and ArcBest

Assuming the 90 days horizon Chuangs China Investments is expected to under-perform the ArcBest. In addition to that, Chuangs China is 1.87 times more volatile than ArcBest. It trades about -0.01 of its total potential returns per unit of risk. ArcBest is currently generating about 0.03 per unit of volatility. If you would invest  7,034  in ArcBest on September 28, 2024 and sell it today you would earn a total of  2,016  from holding ArcBest or generate 28.66% return on investment over 90 days.

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

Chuangs China Investments  vs.  ArcBest

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

ArcBest

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chuangs China and ArcBest

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

The idea behind Chuangs China Investments and ArcBest 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.