Correlation Between Chi Hua and Ruentex Materials
Can any of the company-specific risk be diversified away by investing in both Chi Hua and Ruentex Materials 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 Ruentex Materials 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 Ruentex Materials Co, you can compare the effects of market volatilities on Chi Hua and Ruentex Materials 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 Ruentex Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chi Hua and Ruentex Materials.
Diversification Opportunities for Chi Hua and Ruentex Materials
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chi and Ruentex is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Chi Hua Fitness and Ruentex Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Materials 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 Ruentex Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Materials has no effect on the direction of Chi Hua i.e., Chi Hua and Ruentex Materials go up and down completely randomly.
Pair Corralation between Chi Hua and Ruentex Materials
Assuming the 90 days trading horizon Chi Hua Fitness is expected to generate 0.77 times more return on investment than Ruentex Materials. However, Chi Hua Fitness is 1.3 times less risky than Ruentex Materials. It trades about -0.08 of its potential returns per unit of risk. Ruentex Materials Co is currently generating about -0.12 per unit of risk. If you would invest 3,790 in Chi Hua Fitness on September 1, 2024 and sell it today you would lose (70.00) from holding Chi Hua Fitness or give up 1.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chi Hua Fitness vs. Ruentex Materials Co
Performance |
| Timeline |
| Chi Hua Fitness |
| Ruentex Materials |
Chi Hua and Ruentex Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chi Hua and Ruentex Materials
The main advantage of trading using opposite Chi Hua and Ruentex Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chi Hua position performs unexpectedly, Ruentex Materials 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 Ruentex Materials will offset losses from the drop in Ruentex Materials' 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 |
| Ruentex Materials vs. Taiwan Cement Corp | Ruentex Materials vs. Asia Cement Corp | Ruentex Materials vs. Goldsun Building Materials | Ruentex Materials vs. Universal Cement 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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