Correlation Between Champion Building and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both Champion Building and Chung Hwa 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 Champion Building and Chung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Building Materials and Chung Hwa Pulp, you can compare the effects of market volatilities on Champion Building and Chung Hwa 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 Champion Building with a short position of Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Building and Chung Hwa.
Diversification Opportunities for Champion Building and Chung Hwa
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Champion and Chung is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Champion Building Materials and Chung Hwa Pulp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Pulp and Champion Building 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 Champion Building Materials are associated (or correlated) with Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Pulp has no effect on the direction of Champion Building i.e., Champion Building and Chung Hwa go up and down completely randomly.
Pair Corralation between Champion Building and Chung Hwa
Assuming the 90 days trading horizon Champion Building Materials is expected to generate 1.79 times more return on investment than Chung Hwa. However, Champion Building is 1.79 times more volatile than Chung Hwa Pulp. It trades about -0.14 of its potential returns per unit of risk. Chung Hwa Pulp is currently generating about -0.29 per unit of risk. If you would invest 1,190 in Champion Building Materials on September 4, 2024 and sell it today you would lose (160.00) from holding Champion Building Materials or give up 13.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Building Materials vs. Chung Hwa Pulp
Performance |
| Timeline |
| Champion Building |
| Chung Hwa Pulp |
Champion Building and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Building and Chung Hwa
The main advantage of trading using opposite Champion Building and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Building position performs unexpectedly, Chung Hwa 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 Hwa will offset losses from the drop in Chung Hwa's long position.| Champion Building vs. Universal Microelectronics Co | Champion Building vs. AVerMedia Technologies | Champion Building vs. Symtek Automation Asia | Champion Building vs. WiseChip Semiconductor |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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