Correlation Between Great Wall and Pou Chen
Can any of the company-specific risk be diversified away by investing in both Great Wall and Pou Chen 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 Great Wall and Pou Chen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wall Enterprise and Pou Chen Corp, you can compare the effects of market volatilities on Great Wall and Pou Chen 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 Great Wall with a short position of Pou Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Pou Chen.
Diversification Opportunities for Great Wall and Pou Chen
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Great and Pou is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Pou Chen Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pou Chen Corp and Great Wall 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 Great Wall Enterprise are associated (or correlated) with Pou Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pou Chen Corp has no effect on the direction of Great Wall i.e., Great Wall and Pou Chen go up and down completely randomly.
Pair Corralation between Great Wall and Pou Chen
Assuming the 90 days trading horizon Great Wall is expected to generate 2.29 times less return on investment than Pou Chen. But when comparing it to its historical volatility, Great Wall Enterprise is 3.28 times less risky than Pou Chen. It trades about 0.3 of its potential returns per unit of risk. Pou Chen Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,780 in Pou Chen Corp on August 31, 2024 and sell it today you would earn a total of 335.00 from holding Pou Chen Corp or generate 8.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Wall Enterprise vs. Pou Chen Corp
Performance |
| Timeline |
| Great Wall Enterprise |
| Pou Chen Corp |
Great Wall and Pou Chen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Pou Chen
The main advantage of trading using opposite Great Wall and Pou Chen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Pou Chen 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 Pou Chen will offset losses from the drop in Pou Chen's long position.| Great Wall vs. Charoen Pokphand Enterprise | Great Wall vs. Uni President Enterprises Corp | Great Wall vs. Lien Hwa Industrial | Great Wall vs. Standard Foods Corp |
| Pou Chen vs. Uni President Enterprises Corp | Pou Chen vs. Cheng Shin Rubber | Pou Chen vs. Far Eastern New | Pou Chen vs. Formosa Chemicals Fibre |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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