Correlation Between THORNEY TECHS and Chiba Bank

Can any of the company-specific risk be diversified away by investing in both THORNEY TECHS and Chiba Bank 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 THORNEY TECHS and Chiba Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between THORNEY TECHS LTD and Chiba Bank, you can compare the effects of market volatilities on THORNEY TECHS and Chiba Bank 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 THORNEY TECHS with a short position of Chiba Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of THORNEY TECHS and Chiba Bank.

Diversification Opportunities for THORNEY TECHS and Chiba Bank

-0.49

Correlation Coefficient

THORNEY TECHS  Chiba Bank

Very good diversification

The 3 months correlation between THORNEY and Chiba is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding THORNEY TECHS LTD and Chiba Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiba Bank and THORNEY TECHS 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 THORNEY TECHS LTD are associated (or correlated) with Chiba Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiba Bank has no effect on the direction of THORNEY TECHS i.e., THORNEY TECHS and Chiba Bank go up and down completely randomly.

Pair Corralation between THORNEY TECHS and Chiba Bank

Assuming the 90 days horizon THORNEY TECHS is expected to generate 9.14 times less return on investment than Chiba Bank. In addition to that, THORNEY TECHS is 2.49 times more volatile than Chiba Bank. It trades about 0.01 of its total potential returns per unit of risk. Chiba Bank is currently generating about 0.22 per unit of volatility. If you would invest  730.00  in Chiba Bank on December 28, 2024 and sell it today you would earn a total of  170.00  from holding Chiba Bank or generate 23.29% return on investment over 90 days.

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

THORNEY TECHS LTD  vs.  Chiba Bank

THORNEY TECHS LTD

Risk-Adjusted Performance

Very Weak

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

Chiba Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chiba Bank are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Chiba Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with THORNEY TECHS and Chiba Bank

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

The idea behind THORNEY TECHS LTD and Chiba Bank 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.