Correlation Between ChipsMedia and Furonteer

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

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

Diversification Opportunities for ChipsMedia and Furonteer

0.3

Correlation Coefficient

ChipsMedia  Furonteer

Weak diversification

The 3 months correlation between ChipsMedia and Furonteer is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ChipsMedia and Furonteer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Furonteer and ChipsMedia 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 ChipsMedia are associated (or correlated) with Furonteer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Furonteer has no effect on the direction of ChipsMedia i.e., ChipsMedia and Furonteer go up and down completely randomly.

Pair Corralation between ChipsMedia and Furonteer

Assuming the 90 days trading horizon ChipsMedia is expected to generate 1.03 times more return on investment than Furonteer. However, ChipsMedia is 1.03 times more volatile than Furonteer. It trades about 0.05 of its potential returns per unit of risk. Furonteer is currently generating about 0.04 per unit of risk. If you would invest  772,619  in ChipsMedia on September 28, 2024 and sell it today you would earn a total of  722,381  from holding ChipsMedia or generate 93.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ChipsMedia  vs.  Furonteer

ChipsMedia

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ChipsMedia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ChipsMedia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Furonteer

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Furonteer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Furonteer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChipsMedia and Furonteer

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

The idea behind ChipsMedia and Furonteer 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.