Correlation Between Chi Hua and Chong Hong
Can any of the company-specific risk be diversified away by investing in both Chi Hua and Chong Hong 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 Chong Hong 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 Chong Hong Construction, you can compare the effects of market volatilities on Chi Hua and Chong Hong 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 Chong Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chi Hua and Chong Hong.
Diversification Opportunities for Chi Hua and Chong Hong
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chi and Chong is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Chi Hua Fitness and Chong Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chong Hong Construction 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 Chong Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chong Hong Construction has no effect on the direction of Chi Hua i.e., Chi Hua and Chong Hong go up and down completely randomly.
Pair Corralation between Chi Hua and Chong Hong
Assuming the 90 days trading horizon Chi Hua Fitness is expected to under-perform the Chong Hong. But the stock apears to be less risky and, when comparing its historical volatility, Chi Hua Fitness is 2.46 times less risky than Chong Hong. The stock trades about -0.08 of its potential returns per unit of risk. The Chong Hong Construction is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8,750 in Chong Hong Construction on September 1, 2024 and sell it today you would earn a total of 200.00 from holding Chong Hong Construction or generate 2.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Chi Hua Fitness vs. Chong Hong Construction
Performance |
Timeline |
Chi Hua Fitness |
Chong Hong Construction |
Chi Hua and Chong Hong Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chi Hua and Chong Hong
The main advantage of trading using opposite Chi Hua and Chong Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chi Hua position performs unexpectedly, Chong Hong 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 Chong Hong will offset losses from the drop in Chong Hong's long position.Chi Hua vs. Giant Manufacturing Co | Chi Hua vs. Merida Industry Co | Chi Hua vs. Johnson Health Tech | Chi Hua vs. Power Wind Health |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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