Correlation Between Chung Hwa and FDC International
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and FDC International 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 Chung Hwa and FDC International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hwa Chemical and FDC International Hotels, you can compare the effects of market volatilities on Chung Hwa and FDC International 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 Chung Hwa with a short position of FDC International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and FDC International.
Diversification Opportunities for Chung Hwa and FDC International
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chung and FDC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Chemical and FDC International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDC International Hotels and Chung Hwa 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 Chung Hwa Chemical are associated (or correlated) with FDC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDC International Hotels has no effect on the direction of Chung Hwa i.e., Chung Hwa and FDC International go up and down completely randomly.
Pair Corralation between Chung Hwa and FDC International
Assuming the 90 days trading horizon Chung Hwa Chemical is expected to under-perform the FDC International. In addition to that, Chung Hwa is 1.92 times more volatile than FDC International Hotels. It trades about -0.13 of its total potential returns per unit of risk. FDC International Hotels is currently generating about 0.16 per unit of volatility. If you would invest 5,900 in FDC International Hotels on September 1, 2024 and sell it today you would earn a total of 270.00 from holding FDC International Hotels or generate 4.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hwa Chemical vs. FDC International Hotels
Performance |
| Timeline |
| Chung Hwa Chemical |
| FDC International Hotels |
Chung Hwa and FDC International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hwa and FDC International
The main advantage of trading using opposite Chung Hwa and FDC International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, FDC International 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 FDC International will offset losses from the drop in FDC International's long position.| Chung Hwa vs. Oriental Union Chemical | Chung Hwa vs. Everlight Chemical Industrial | Chung Hwa vs. Formosan Union Chemical | Chung Hwa vs. Sesoda Corp |
| FDC International vs. Chaintech Technology Corp | FDC International vs. AVerMedia Technologies | FDC International vs. Avision | FDC International vs. Clevo 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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