Correlation Between Chart Industries and Cummins

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

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

Diversification Opportunities for Chart Industries and Cummins

0.93

Correlation Coefficient

Chart Industries  Cummins

Almost no diversification

The 3 months correlation between Chart and Cummins is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Chart Industries and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins and Chart Industries 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 Chart Industries are associated (or correlated) with Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Chart Industries i.e., Chart Industries and Cummins go up and down completely randomly.

Pair Corralation between Chart Industries and Cummins

Given the investment horizon of 90 days Chart Industries is expected to generate 1.85 times more return on investment than Cummins. However, Chart Industries is 1.85 times more volatile than Cummins. It trades about -0.02 of its potential returns per unit of risk. Cummins is currently generating about -0.06 per unit of risk. If you would invest  19,827  in Chart Industries on February 15, 2025 and sell it today you would lose (2,792) from holding Chart Industries or give up 14.08% of portfolio value over 90 days.

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

Chart Industries  vs.  Cummins

Chart Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chart Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cummins

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cummins has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Chart Industries and Cummins

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

The idea behind Chart Industries and Cummins 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.