Correlation Between Froch Enterprise and Chun Yuan

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

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

Diversification Opportunities for Froch Enterprise and Chun Yuan

0.28

Correlation Coefficient

Froch Enterprise  Chun Yuan

Modest diversification

The 3 months correlation between Froch and Chun is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Froch Enterprise Co and Chun Yuan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chun Yuan Steel and Froch Enterprise 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 Froch Enterprise Co are associated (or correlated) with Chun Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chun Yuan Steel has no effect on the direction of Froch Enterprise i.e., Froch Enterprise and Chun Yuan go up and down completely randomly.

Pair Corralation between Froch Enterprise and Chun Yuan

Assuming the 90 days trading horizon Froch Enterprise Co is expected to under-perform the Chun Yuan. But the stock apears to be less risky and, when comparing its historical volatility, Froch Enterprise Co is 1.06 times less risky than Chun Yuan. The stock trades about -0.13 of its potential returns per unit of risk. The Chun Yuan Steel is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,850  in Chun Yuan Steel on September 27, 2024 and sell it today you would lose (35.00) from holding Chun Yuan Steel or give up 1.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Froch Enterprise Co  vs.  Chun Yuan Steel

Froch Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Froch Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Chun Yuan Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chun Yuan Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chun Yuan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Froch Enterprise and Chun Yuan

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

The idea behind Froch Enterprise Co and Chun Yuan Steel 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.