Correlation Between Chi Hua and Hotai
Can any of the company-specific risk be diversified away by investing in both Chi Hua and Hotai 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 Chi Hua and Hotai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chi Hua Fitness and Hotai Motor Co, you can compare the effects of market volatilities on Chi Hua and Hotai 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 Chi Hua with a short position of Hotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chi Hua and Hotai.
Diversification Opportunities for Chi Hua and Hotai
Very weak diversification
The 3 months correlation between Chi and Hotai is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Chi Hua Fitness and Hotai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotai Motor and Chi Hua 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 Chi Hua Fitness are associated (or correlated) with Hotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotai Motor has no effect on the direction of Chi Hua i.e., Chi Hua and Hotai go up and down completely randomly.
Pair Corralation between Chi Hua and Hotai
Assuming the 90 days trading horizon Chi Hua Fitness is expected to generate 10.0 times more return on investment than Hotai. However, Chi Hua is 10.0 times more volatile than Hotai Motor Co. It trades about 0.03 of its potential returns per unit of risk. Hotai Motor Co is currently generating about 0.01 per unit of risk. If you would invest 6,445 in Chi Hua Fitness on August 30, 2024 and sell it today you would lose (2,720) from holding Chi Hua Fitness or give up 42.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Chi Hua Fitness vs. Hotai Motor Co
Performance |
| Timeline |
| Chi Hua Fitness |
| Hotai Motor |
Chi Hua and Hotai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chi Hua and Hotai
The main advantage of trading using opposite Chi Hua and Hotai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chi Hua position performs unexpectedly, Hotai 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 Hotai will offset losses from the drop in Hotai's long position.| Chi Hua vs. Feng Tay Enterprises | Chi Hua vs. Ruentex Materials Co | Chi Hua vs. Symtek Automation Asia | Chi Hua vs. CTCI Corp |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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