Correlation Between Solar Applied and Chung Fu
Can any of the company-specific risk be diversified away by investing in both Solar Applied and Chung Fu 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 Solar Applied and Chung Fu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solar Applied Materials and Chung Fu Tex International, you can compare the effects of market volatilities on Solar Applied and Chung Fu 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 Solar Applied with a short position of Chung Fu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Applied and Chung Fu.
Diversification Opportunities for Solar Applied and Chung Fu
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Solar and Chung is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Solar Applied Materials and Chung Fu Tex International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Fu Tex and Solar Applied 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 Solar Applied Materials are associated (or correlated) with Chung Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Fu Tex has no effect on the direction of Solar Applied i.e., Solar Applied and Chung Fu go up and down completely randomly.
Pair Corralation between Solar Applied and Chung Fu
Assuming the 90 days trading horizon Solar Applied Materials is expected to generate 1.51 times more return on investment than Chung Fu. However, Solar Applied is 1.51 times more volatile than Chung Fu Tex International. It trades about 0.06 of its potential returns per unit of risk. Chung Fu Tex International is currently generating about -0.14 per unit of risk. If you would invest 6,560 in Solar Applied Materials on September 12, 2024 and sell it today you would earn a total of 170.00 from holding Solar Applied Materials or generate 2.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Solar Applied Materials vs. Chung Fu Tex International
Performance |
| Timeline |
| Solar Applied Materials |
| Chung Fu Tex |
Solar Applied and Chung Fu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solar Applied and Chung Fu
The main advantage of trading using opposite Solar Applied and Chung Fu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solar Applied position performs unexpectedly, Chung Fu 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 Chung Fu will offset losses from the drop in Chung Fu's long position.| Solar Applied vs. Catcher Technology Co | Solar Applied vs. Evergreen Steel Corp | Solar Applied vs. Shin Zu Shing | Solar Applied vs. China Metal Products |
| Chung Fu vs. Tehmag Foods | Chung Fu vs. China Steel Corp | Chung Fu vs. ECOVE Environment Corp | Chung Fu vs. Taiwan Steel Union |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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