Correlation Between ReaLy Development and Chung Hsin
Can any of the company-specific risk be diversified away by investing in both ReaLy Development and Chung Hsin 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 ReaLy Development and Chung Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ReaLy Development Construction and Chung Hsin Electric Machinery, you can compare the effects of market volatilities on ReaLy Development and Chung Hsin 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 ReaLy Development with a short position of Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of ReaLy Development and Chung Hsin.
Diversification Opportunities for ReaLy Development and Chung Hsin
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ReaLy and Chung is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding ReaLy Development Construction and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric and ReaLy 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 ReaLy Development Construction are associated (or correlated) with Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of ReaLy Development i.e., ReaLy Development and Chung Hsin go up and down completely randomly.
Pair Corralation between ReaLy Development and Chung Hsin
Assuming the 90 days trading horizon ReaLy Development Construction is expected to under-perform the Chung Hsin. But the stock apears to be less risky and, when comparing its historical volatility, ReaLy Development Construction is 1.11 times less risky than Chung Hsin. The stock trades about -0.29 of its potential returns per unit of risk. The Chung Hsin Electric Machinery is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 15,800 in Chung Hsin Electric Machinery on November 5, 2024 and sell it today you would lose (300.00) from holding Chung Hsin Electric Machinery or give up 1.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ReaLy Development Construction vs. Chung Hsin Electric Machinery
Performance |
| Timeline |
| ReaLy Development |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Chung Hsin Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
ReaLy Development and Chung Hsin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ReaLy Development and Chung Hsin
The main advantage of trading using opposite ReaLy Development and Chung Hsin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ReaLy Development position performs unexpectedly, Chung Hsin 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 Hsin will offset losses from the drop in Chung Hsin's long position.The idea behind ReaLy Development Construction and Chung Hsin Electric Machinery pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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