Correlation Between New Asia and Chumpower Machinery
Can any of the company-specific risk be diversified away by investing in both New Asia and Chumpower Machinery 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 New Asia and Chumpower Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Asia Construction and Chumpower Machinery Corp, you can compare the effects of market volatilities on New Asia and Chumpower Machinery 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 New Asia with a short position of Chumpower Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Asia and Chumpower Machinery.
Diversification Opportunities for New Asia and Chumpower Machinery
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and Chumpower is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding New Asia Construction and Chumpower Machinery Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chumpower Machinery Corp and New Asia 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 New Asia Construction are associated (or correlated) with Chumpower Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chumpower Machinery Corp has no effect on the direction of New Asia i.e., New Asia and Chumpower Machinery go up and down completely randomly.
Pair Corralation between New Asia and Chumpower Machinery
Assuming the 90 days trading horizon New Asia Construction is expected to generate 2.54 times more return on investment than Chumpower Machinery. However, New Asia is 2.54 times more volatile than Chumpower Machinery Corp. It trades about 0.42 of its potential returns per unit of risk. Chumpower Machinery Corp is currently generating about 0.15 per unit of risk. If you would invest 1,240 in New Asia Construction on October 23, 2024 and sell it today you would earn a total of 540.00 from holding New Asia Construction or generate 43.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Asia Construction vs. Chumpower Machinery Corp
Performance |
| Timeline |
| New Asia Construction |
| Chumpower Machinery Corp |
New Asia and Chumpower Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Asia and Chumpower Machinery
The main advantage of trading using opposite New Asia and Chumpower Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Asia position performs unexpectedly, Chumpower Machinery 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 Chumpower Machinery will offset losses from the drop in Chumpower Machinery's long position.| New Asia vs. BES Engineering Co | New Asia vs. Delpha Construction Co | New Asia vs. Cathay Real Estate | New Asia vs. Da Cin Construction Co |
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Check out your portfolio center.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.
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