Correlation Between Chaheng Precision and ADLINK Technology

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

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

Diversification Opportunities for Chaheng Precision and ADLINK Technology

-0.39

Correlation Coefficient

Chaheng Precision  ADLINK Technology

Very good diversification

The 3 months correlation between Chaheng and ADLINK is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Chaheng Precision Co and ADLINK Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADLINK Technology and Chaheng Precision 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 Chaheng Precision Co are associated (or correlated) with ADLINK Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADLINK Technology has no effect on the direction of Chaheng Precision i.e., Chaheng Precision and ADLINK Technology go up and down completely randomly.

Pair Corralation between Chaheng Precision and ADLINK Technology

Assuming the 90 days trading horizon Chaheng Precision Co is expected to under-perform the ADLINK Technology. But the stock apears to be less risky and, when comparing its historical volatility, Chaheng Precision Co is 1.52 times less risky than ADLINK Technology. The stock trades about -0.05 of its potential returns per unit of risk. The ADLINK Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,960  in ADLINK Technology on September 28, 2024 and sell it today you would earn a total of  930.00  from holding ADLINK Technology or generate 13.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Chaheng Precision Co  vs.  ADLINK Technology

Chaheng Precision

Risk-Adjusted Performance

0 of 100

Very Weak

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

ADLINK Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADLINK Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ADLINK Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chaheng Precision and ADLINK Technology

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

The idea behind Chaheng Precision Co and ADLINK Technology 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.