Correlation Between Interarch Building and Chembond Chemicals

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

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

Diversification Opportunities for Interarch Building and Chembond Chemicals

-0.66

Correlation Coefficient

Interarch Building  Chembond Chemicals

Excellent diversification

The 3 months correlation between Interarch and Chembond is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Interarch Building Products and Chembond Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chembond Chemicals and Interarch Building 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 Interarch Building Products are associated (or correlated) with Chembond Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chembond Chemicals has no effect on the direction of Interarch Building i.e., Interarch Building and Chembond Chemicals go up and down completely randomly.

Pair Corralation between Interarch Building and Chembond Chemicals

Assuming the 90 days trading horizon Interarch Building Products is expected to generate 1.69 times more return on investment than Chembond Chemicals. However, Interarch Building is 1.69 times more volatile than Chembond Chemicals. It trades about 0.31 of its potential returns per unit of risk. Chembond Chemicals is currently generating about 0.31 per unit of risk. If you would invest  145,370  in Interarch Building Products on September 22, 2024 and sell it today you would earn a total of  29,210  from holding Interarch Building Products or generate 20.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Interarch Building Products  vs.  Chembond Chemicals

Interarch Building

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Interarch Building Products are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Interarch Building reported solid returns over the last few months and may actually be approaching a breakup point.

Chembond Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chembond Chemicals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Chembond Chemicals is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Interarch Building and Chembond Chemicals

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

The idea behind Interarch Building Products and Chembond Chemicals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.