Correlation Between Chung Fu and Merida Industry
Can any of the company-specific risk be diversified away by investing in both Chung Fu and Merida Industry 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 Chung Fu and Merida Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Fu Tex International and Merida Industry Co, you can compare the effects of market volatilities on Chung Fu and Merida Industry 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 Chung Fu with a short position of Merida Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Fu and Merida Industry.
Diversification Opportunities for Chung Fu and Merida Industry
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chung and Merida is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chung Fu Tex International and Merida Industry Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merida Industry and Chung Fu 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 Chung Fu Tex International are associated (or correlated) with Merida Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merida Industry has no effect on the direction of Chung Fu i.e., Chung Fu and Merida Industry go up and down completely randomly.
Pair Corralation between Chung Fu and Merida Industry
Assuming the 90 days trading horizon Chung Fu Tex International is expected to under-perform the Merida Industry. In addition to that, Chung Fu is 1.04 times more volatile than Merida Industry Co. It trades about -0.24 of its total potential returns per unit of risk. Merida Industry Co is currently generating about -0.23 per unit of volatility. If you would invest 18,450 in Merida Industry Co on August 29, 2024 and sell it today you would lose (2,100) from holding Merida Industry Co or give up 11.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Fu Tex International vs. Merida Industry Co
Performance |
| Timeline |
| Chung Fu Tex |
| Merida Industry |
Chung Fu and Merida Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Fu and Merida Industry
The main advantage of trading using opposite Chung Fu and Merida Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Fu position performs unexpectedly, Merida Industry 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 Merida Industry will offset losses from the drop in Merida Industry's long position.| Chung Fu vs. Arima Communications Corp | Chung Fu vs. Integrated Service Technology | Chung Fu vs. Microtips Technology | Chung Fu vs. Ichia Technologies |
| Merida Industry vs. Yulon Finance Corp | Merida Industry vs. Taiwan Secom Co | Merida Industry vs. Pou Chen Corp | Merida Industry vs. Great Wall Enterprise |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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