Correlation Between Eastern Commercial and CH Karnchang

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

By analyzing existing cross correlation between Eastern Commercial Leasing and CH Karnchang Public, you can compare the effects of market volatilities on Eastern Commercial and CH Karnchang 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 Eastern Commercial with a short position of CH Karnchang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Commercial and CH Karnchang.

Diversification Opportunities for Eastern Commercial and CH Karnchang

0.06

Correlation Coefficient

Eastern Commercial  CH Karnchang

Significant diversification

The 3 months correlation between Eastern and CH Karnchang is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Commercial Leasing and CH Karnchang Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CH Karnchang Public and Eastern Commercial 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 Eastern Commercial Leasing are associated (or correlated) with CH Karnchang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CH Karnchang Public has no effect on the direction of Eastern Commercial i.e., Eastern Commercial and CH Karnchang go up and down completely randomly.

Pair Corralation between Eastern Commercial and CH Karnchang

Assuming the 90 days trading horizon Eastern Commercial Leasing is expected to generate 46.09 times more return on investment than CH Karnchang. However, Eastern Commercial is 46.09 times more volatile than CH Karnchang Public. It trades about 0.08 of its potential returns per unit of risk. CH Karnchang Public is currently generating about -0.02 per unit of risk. If you would invest  108.00  in Eastern Commercial Leasing on September 15, 2024 and sell it today you would lose (2.00) from holding Eastern Commercial Leasing or give up 1.85% of portfolio value over 90 days.

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

Eastern Commercial Leasing  vs.  CH Karnchang Public

Eastern Commercial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Commercial Leasing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Eastern Commercial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CH Karnchang Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CH Karnchang Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, CH Karnchang is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Eastern Commercial and CH Karnchang

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

The idea behind Eastern Commercial Leasing and CH Karnchang Public 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.