Correlation Between Daxin Materials and Chernan Metal

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

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

Diversification Opportunities for Daxin Materials and Chernan Metal

-0.04

Correlation Coefficient

Daxin Materials  Chernan Metal

Good diversification

The 3 months correlation between Daxin and Chernan is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Daxin Materials Corp and Chernan Metal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chernan Metal Industrial and Daxin Materials 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 Daxin Materials Corp are associated (or correlated) with Chernan Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chernan Metal Industrial has no effect on the direction of Daxin Materials i.e., Daxin Materials and Chernan Metal go up and down completely randomly.

Pair Corralation between Daxin Materials and Chernan Metal

Assuming the 90 days trading horizon Daxin Materials Corp is expected to generate 2.18 times more return on investment than Chernan Metal. However, Daxin Materials is 2.18 times more volatile than Chernan Metal Industrial. It trades about 0.06 of its potential returns per unit of risk. Chernan Metal Industrial is currently generating about -0.05 per unit of risk. If you would invest  18,700  in Daxin Materials Corp on September 12, 2024 and sell it today you would earn a total of  2,050  from holding Daxin Materials Corp or generate 10.96% return on investment over 90 days.

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

Daxin Materials Corp  vs.  Chernan Metal Industrial

Daxin Materials Corp

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Daxin Materials Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Daxin Materials showed solid returns over the last few months and may actually be approaching a breakup point.

Chernan Metal Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chernan Metal Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chernan Metal 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 Daxin Materials and Chernan Metal

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

The idea behind Daxin Materials Corp and Chernan Metal Industrial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.