Correlation Between Cameo Communications and Chumpower Machinery
Can any of the company-specific risk be diversified away by investing in both Cameo Communications 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 Cameo Communications and Chumpower Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cameo Communications and Chumpower Machinery Corp, you can compare the effects of market volatilities on Cameo Communications 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 Cameo Communications with a short position of Chumpower Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cameo Communications and Chumpower Machinery.
Diversification Opportunities for Cameo Communications and Chumpower Machinery
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cameo and Chumpower is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cameo Communications 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 Cameo Communications 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 Cameo Communications 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 Cameo Communications i.e., Cameo Communications and Chumpower Machinery go up and down completely randomly.
Pair Corralation between Cameo Communications and Chumpower Machinery
Assuming the 90 days trading horizon Cameo Communications is expected to under-perform the Chumpower Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Cameo Communications is 1.52 times less risky than Chumpower Machinery. The stock trades about -0.25 of its potential returns per unit of risk. The Chumpower Machinery Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,175 in Chumpower Machinery Corp on November 3, 2024 and sell it today you would earn a total of 140.00 from holding Chumpower Machinery Corp or generate 6.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cameo Communications vs. Chumpower Machinery Corp
Performance |
| Timeline |
| Cameo Communications |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chumpower Machinery Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Cameo Communications and Chumpower Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cameo Communications and Chumpower Machinery
The main advantage of trading using opposite Cameo Communications and Chumpower Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cameo Communications 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.The idea behind Cameo Communications and Chumpower Machinery Corp 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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