Correlation Between Chun Yuan and China Man
Can any of the company-specific risk be diversified away by investing in both Chun Yuan and China Man 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 Chun Yuan and China Man into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chun Yuan Steel and China Man Made Fiber, you can compare the effects of market volatilities on Chun Yuan and China Man 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 Chun Yuan with a short position of China Man. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chun Yuan and China Man.
Diversification Opportunities for Chun Yuan and China Man
Very weak diversification
The 3 months correlation between Chun and China is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Chun Yuan Steel and China Man Made Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Man Made and Chun Yuan 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 Chun Yuan Steel are associated (or correlated) with China Man. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Man Made has no effect on the direction of Chun Yuan i.e., Chun Yuan and China Man go up and down completely randomly.
Pair Corralation between Chun Yuan and China Man
Assuming the 90 days trading horizon Chun Yuan Steel is expected to generate 1.23 times more return on investment than China Man. However, Chun Yuan is 1.23 times more volatile than China Man Made Fiber. It trades about 0.02 of its potential returns per unit of risk. China Man Made Fiber is currently generating about -0.03 per unit of risk. If you would invest 1,685 in Chun Yuan Steel on November 27, 2024 and sell it today you would earn a total of 205.00 from holding Chun Yuan Steel or generate 12.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chun Yuan Steel vs. China Man Made Fiber
Performance |
| Timeline |
| Chun Yuan Steel |
| China Man Made |
Chun Yuan and China Man Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chun Yuan and China Man
The main advantage of trading using opposite Chun Yuan and China Man positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chun Yuan position performs unexpectedly, China Man 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 China Man will offset losses from the drop in China Man's long position.| Chun Yuan vs. Hsin Kuang Steel | Chun Yuan vs. Chung Hung Steel | Chun Yuan vs. China Steel Structure | Chun Yuan vs. Feng Hsin Steel |
| China Man vs. Oriental Union Chemical | China Man vs. China Petrochemical Development | China Man vs. Taiwan Styrene Monomer | China Man vs. Grand Pacific Petrochemical |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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