Correlation Between Choo Bee and Press Metal
Can any of the company-specific risk be diversified away by investing in both Choo Bee and Press Metal 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 Choo Bee and Press Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Choo Bee Metal and Press Metal Bhd, you can compare the effects of market volatilities on Choo Bee and Press Metal 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 Choo Bee with a short position of Press Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choo Bee and Press Metal.
Diversification Opportunities for Choo Bee and Press Metal
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Choo and Press is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Choo Bee Metal and Press Metal Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Press Metal Bhd and Choo Bee 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 Choo Bee Metal are associated (or correlated) with Press Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Press Metal Bhd has no effect on the direction of Choo Bee i.e., Choo Bee and Press Metal go up and down completely randomly.
Pair Corralation between Choo Bee and Press Metal
Assuming the 90 days trading horizon Choo Bee Metal is expected to generate 0.97 times more return on investment than Press Metal. However, Choo Bee Metal is 1.03 times less risky than Press Metal. It trades about -0.02 of its potential returns per unit of risk. Press Metal Bhd is currently generating about -0.03 per unit of risk. If you would invest 76.00 in Choo Bee Metal on August 28, 2024 and sell it today you would lose (1.00) from holding Choo Bee Metal or give up 1.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choo Bee Metal vs. Press Metal Bhd
Performance |
| Timeline |
| Choo Bee Metal |
| Press Metal Bhd |
Choo Bee and Press Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choo Bee and Press Metal
The main advantage of trading using opposite Choo Bee and Press Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choo Bee position performs unexpectedly, Press Metal 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 Press Metal will offset losses from the drop in Press Metal's long position.The idea behind Choo Bee Metal and Press Metal Bhd 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.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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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