Correlation Between FDC International and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both FDC International 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 FDC International and Chung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FDC International Hotels and Chung Hwa Chemical, you can compare the effects of market volatilities on FDC International 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 FDC International with a short position of Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of FDC International and Chung Hwa.
Diversification Opportunities for FDC International and Chung Hwa
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FDC and Chung is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding FDC International Hotels and Chung Hwa Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Chemical and FDC International 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 FDC International Hotels 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 Chemical has no effect on the direction of FDC International i.e., FDC International and Chung Hwa go up and down completely randomly.
Pair Corralation between FDC International and Chung Hwa
Assuming the 90 days trading horizon FDC International Hotels is expected to generate 0.52 times more return on investment than Chung Hwa. However, FDC International Hotels is 1.92 times less risky than Chung Hwa. It trades about 0.16 of its potential returns per unit of risk. Chung Hwa Chemical is currently generating about -0.13 per unit of risk. If you would invest 5,900 in FDC International Hotels on September 1, 2024 and sell it today you would earn a total of 270.00 from holding FDC International Hotels or generate 4.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FDC International Hotels vs. Chung Hwa Chemical
Performance |
| Timeline |
| FDC International Hotels |
| Chung Hwa Chemical |
FDC International and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FDC International and Chung Hwa
The main advantage of trading using opposite FDC International and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FDC International 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.| FDC International vs. Chaintech Technology Corp | FDC International vs. AVerMedia Technologies | FDC International vs. Avision | FDC International vs. Clevo Co |
| Chung Hwa vs. Oriental Union Chemical | Chung Hwa vs. Everlight Chemical Industrial | Chung Hwa vs. Formosan Union Chemical | Chung Hwa vs. Sesoda Corp |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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