Correlation Between Huaku Development and ZongTai Real
Can any of the company-specific risk be diversified away by investing in both Huaku Development and ZongTai Real 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 Huaku Development and ZongTai Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Huaku Development Co and ZongTai Real Estate, you can compare the effects of market volatilities on Huaku Development and ZongTai Real 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 Huaku Development with a short position of ZongTai Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaku Development and ZongTai Real.
Diversification Opportunities for Huaku Development and ZongTai Real
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Huaku and ZongTai is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Huaku Development Co and ZongTai Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZongTai Real Estate and Huaku Development 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 Huaku Development Co are associated (or correlated) with ZongTai Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZongTai Real Estate has no effect on the direction of Huaku Development i.e., Huaku Development and ZongTai Real go up and down completely randomly.
Pair Corralation between Huaku Development and ZongTai Real
Assuming the 90 days trading horizon Huaku Development is expected to generate 1.89 times less return on investment than ZongTai Real. But when comparing it to its historical volatility, Huaku Development Co is 1.57 times less risky than ZongTai Real. It trades about 0.05 of its potential returns per unit of risk. ZongTai Real Estate is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,918 in ZongTai Real Estate on September 3, 2024 and sell it today you would earn a total of 1,517 from holding ZongTai Real Estate or generate 79.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Huaku Development Co vs. ZongTai Real Estate
Performance |
| Timeline |
| Huaku Development |
| ZongTai Real Estate |
Huaku Development and ZongTai Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Huaku Development and ZongTai Real
The main advantage of trading using opposite Huaku Development and ZongTai Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huaku Development position performs unexpectedly, ZongTai Real 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 ZongTai Real will offset losses from the drop in ZongTai Real's long position.| Huaku Development vs. Chong Hong Construction | Huaku Development vs. Highwealth Construction Corp | Huaku Development vs. Fubon Financial Holding | Huaku Development vs. CTBC Financial Holding |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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