Correlation Between Chuangs China and Cintas

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

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

Diversification Opportunities for Chuangs China and Cintas

-0.08

Correlation Coefficient

Chuangs China  Cintas

Good diversification

The 3 months correlation between Chuangs and Cintas is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas and Chuangs China 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 Chuangs China Investments are associated (or correlated) with Cintas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cintas has no effect on the direction of Chuangs China i.e., Chuangs China and Cintas go up and down completely randomly.

Pair Corralation between Chuangs China and Cintas

Assuming the 90 days horizon Chuangs China Investments is expected to generate 0.42 times more return on investment than Cintas. However, Chuangs China Investments is 2.38 times less risky than Cintas. It trades about 0.0 of its potential returns per unit of risk. Cintas is currently generating about -0.01 per unit of risk. If you would invest  1.00  in Chuangs China Investments on September 28, 2024 and sell it today you would earn a total of  0.00  from holding Chuangs China Investments or generate 0.0% return on investment over 90 days.

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

Chuangs China Investments  vs.  Cintas

Chuangs China Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chuangs China Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chuangs China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Cintas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cintas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cintas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chuangs China and Cintas

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

The idea behind Chuangs China Investments and Cintas 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.