Correlation Between Mechema Chemicals and Wafer Works
Can any of the company-specific risk be diversified away by investing in both Mechema Chemicals and Wafer Works 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 Mechema Chemicals and Wafer Works into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mechema Chemicals Int and Wafer Works, you can compare the effects of market volatilities on Mechema Chemicals and Wafer Works 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 Mechema Chemicals with a short position of Wafer Works. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mechema Chemicals and Wafer Works.
Diversification Opportunities for Mechema Chemicals and Wafer Works
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mechema and Wafer is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Mechema Chemicals Int and Wafer Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wafer Works and Mechema Chemicals 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 Mechema Chemicals Int are associated (or correlated) with Wafer Works. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wafer Works has no effect on the direction of Mechema Chemicals i.e., Mechema Chemicals and Wafer Works go up and down completely randomly.
Pair Corralation between Mechema Chemicals and Wafer Works
Assuming the 90 days trading horizon Mechema Chemicals Int is expected to under-perform the Wafer Works. In addition to that, Mechema Chemicals is 1.16 times more volatile than Wafer Works. It trades about -0.03 of its total potential returns per unit of risk. Wafer Works is currently generating about -0.03 per unit of volatility. If you would invest 4,126 in Wafer Works on August 30, 2024 and sell it today you would lose (1,126) from holding Wafer Works or give up 27.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mechema Chemicals Int vs. Wafer Works
Performance |
| Timeline |
| Mechema Chemicals Int |
| Wafer Works |
Mechema Chemicals and Wafer Works Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mechema Chemicals and Wafer Works
The main advantage of trading using opposite Mechema Chemicals and Wafer Works positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mechema Chemicals position performs unexpectedly, Wafer Works 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 Wafer Works will offset losses from the drop in Wafer Works' long position.| Mechema Chemicals vs. Nantex Industry Co | Mechema Chemicals vs. Chong Hong Construction | Mechema Chemicals vs. Cleanaway Co | Mechema Chemicals vs. Symtek Automation Asia |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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