Correlation Between Ho Tung and Cheng Fwa
Can any of the company-specific risk be diversified away by investing in both Ho Tung 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 Ho Tung and Cheng Fwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ho Tung Chemical and Cheng Fwa Industrial, you can compare the effects of market volatilities on Ho Tung 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 Ho Tung with a short position of Cheng Fwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ho Tung and Cheng Fwa.
Diversification Opportunities for Ho Tung and Cheng Fwa
Very good diversification
The 3 months correlation between 1714 and Cheng is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ho Tung Chemical 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 Ho Tung 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 Ho Tung Chemical 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 Ho Tung i.e., Ho Tung and Cheng Fwa go up and down completely randomly.
Pair Corralation between Ho Tung and Cheng Fwa
Assuming the 90 days trading horizon Ho Tung Chemical is expected to generate 0.18 times more return on investment than Cheng Fwa. However, Ho Tung Chemical is 5.64 times less risky than Cheng Fwa. It trades about 0.06 of its potential returns per unit of risk. Cheng Fwa Industrial is currently generating about -0.01 per unit of risk. If you would invest 836.00 in Ho Tung Chemical on September 5, 2024 and sell it today you would earn a total of 7.00 from holding Ho Tung Chemical or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ho Tung Chemical vs. Cheng Fwa Industrial
Performance |
| Timeline |
| Ho Tung Chemical |
| Cheng Fwa Industrial |
Ho Tung and Cheng Fwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ho Tung and Cheng Fwa
The main advantage of trading using opposite Ho Tung and Cheng Fwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ho Tung 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.| Ho Tung vs. Everlight Chemical Industrial | Ho Tung vs. China Man Made Fiber | Ho Tung vs. Oriental Union Chemical | Ho Tung vs. Grand Pacific Petrochemical |
| Cheng Fwa vs. WinMate Communication INC | Cheng Fwa vs. SynCore Biotechnology Co | Cheng Fwa vs. Loop Telecommunication International | Cheng Fwa vs. Sunmax Biotechnology 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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