Correlation Between CHAR Technologies and Covalon Technologies

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

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

Diversification Opportunities for CHAR Technologies and Covalon Technologies

-0.44

Correlation Coefficient

CHAR Technologies  Covalon Technologies

Very good diversification

The 3 months correlation between CHAR and Covalon is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CHAR Technologies and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies and CHAR Technologies 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 CHAR Technologies are associated (or correlated) with Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of CHAR Technologies i.e., CHAR Technologies and Covalon Technologies go up and down completely randomly.

Pair Corralation between CHAR Technologies and Covalon Technologies

Assuming the 90 days horizon CHAR Technologies is expected to under-perform the Covalon Technologies. But the stock apears to be less risky and, when comparing its historical volatility, CHAR Technologies is 1.31 times less risky than Covalon Technologies. The stock trades about -0.04 of its potential returns per unit of risk. The Covalon Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  160.00  in Covalon Technologies on October 4, 2024 and sell it today you would earn a total of  153.00  from holding Covalon Technologies or generate 95.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.7%
Values	Daily Returns

CHAR Technologies  vs.  Covalon Technologies

CHAR Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHAR Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CHAR Technologies is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Covalon Technologies

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Covalon Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Covalon Technologies is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CHAR Technologies and Covalon Technologies

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

The idea behind CHAR Technologies and Covalon Technologies 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .