Correlation Between Kaulin Mfg and Cheng Fwa
Can any of the company-specific risk be diversified away by investing in both Kaulin Mfg and Cheng Fwa 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 Kaulin Mfg and Cheng Fwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaulin Mfg and Cheng Fwa Industrial, you can compare the effects of market volatilities on Kaulin Mfg and Cheng Fwa 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 Kaulin Mfg with a short position of Cheng Fwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaulin Mfg and Cheng Fwa.
Diversification Opportunities for Kaulin Mfg and Cheng Fwa
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kaulin and Cheng is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Kaulin Mfg and Cheng Fwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Fwa Industrial and Kaulin Mfg 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 Kaulin Mfg are associated (or correlated) with Cheng Fwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Fwa Industrial has no effect on the direction of Kaulin Mfg i.e., Kaulin Mfg and Cheng Fwa go up and down completely randomly.
Pair Corralation between Kaulin Mfg and Cheng Fwa
Assuming the 90 days trading horizon Kaulin Mfg is expected to generate 2.65 times less return on investment than Cheng Fwa. But when comparing it to its historical volatility, Kaulin Mfg is 2.04 times less risky than Cheng Fwa. It trades about 0.05 of its potential returns per unit of risk. Cheng Fwa Industrial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,090 in Cheng Fwa Industrial on September 4, 2024 and sell it today you would earn a total of 1,095 from holding Cheng Fwa Industrial or generate 52.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kaulin Mfg vs. Cheng Fwa Industrial
Performance |
| Timeline |
| Kaulin Mfg |
| Cheng Fwa Industrial |
Kaulin Mfg and Cheng Fwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kaulin Mfg and Cheng Fwa
The main advantage of trading using opposite Kaulin Mfg and Cheng Fwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaulin Mfg position performs unexpectedly, Cheng Fwa 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 Cheng Fwa will offset losses from the drop in Cheng Fwa's long position.| Kaulin Mfg vs. Tainan Enterprises Co | Kaulin Mfg vs. Nien Hsing Textile | Kaulin Mfg vs. De Licacy Industrial | Kaulin Mfg vs. Kwong Fong Industries |
| Cheng Fwa vs. Nankang Rubber Tire | Cheng Fwa vs. Newretail Co | Cheng Fwa vs. Cheng Mei Materials | Cheng Fwa vs. Tradetool Auto Co |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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