Correlation Between Chun Yuan and Advanced Analog

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

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

Diversification Opportunities for Chun Yuan and Advanced Analog

0.14

Correlation Coefficient

Chun Yuan  Advanced Analog

Average diversification

The 3 months correlation between Chun and Advanced is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Chun Yuan Steel and Advanced Analog Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Analog Tech and Chun Yuan 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 Chun Yuan Steel are associated (or correlated) with Advanced Analog. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Analog Tech has no effect on the direction of Chun Yuan i.e., Chun Yuan and Advanced Analog go up and down completely randomly.

Pair Corralation between Chun Yuan and Advanced Analog

Assuming the 90 days trading horizon Chun Yuan is expected to generate 2.17 times less return on investment than Advanced Analog. But when comparing it to its historical volatility, Chun Yuan Steel is 1.78 times less risky than Advanced Analog. It trades about 0.03 of its potential returns per unit of risk. Advanced Analog Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,166  in Advanced Analog Technology on September 14, 2024 and sell it today you would earn a total of  1,674  from holding Advanced Analog Technology or generate 32.4% return on investment over 90 days.

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

Chun Yuan Steel  vs.  Advanced Analog Technology

Chun Yuan Steel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chun Yuan Steel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chun Yuan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Advanced Analog Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Analog Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Advanced Analog 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 Chun Yuan and Advanced Analog

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

The idea behind Chun Yuan Steel and Advanced Analog 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.