Correlation Between Hua Nan and Huaku Development
Can any of the company-specific risk be diversified away by investing in both Hua Nan and Huaku Development 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 Hua Nan and Huaku Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hua Nan Financial and Huaku Development Co, you can compare the effects of market volatilities on Hua Nan and Huaku Development 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 Hua Nan with a short position of Huaku Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Nan and Huaku Development.
Diversification Opportunities for Hua Nan and Huaku Development
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hua and Huaku is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hua Nan Financial and Huaku Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaku Development and Hua Nan 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 Hua Nan Financial are associated (or correlated) with Huaku Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaku Development has no effect on the direction of Hua Nan i.e., Hua Nan and Huaku Development go up and down completely randomly.
Pair Corralation between Hua Nan and Huaku Development
Assuming the 90 days trading horizon Hua Nan Financial is expected to generate 0.4 times more return on investment than Huaku Development. However, Hua Nan Financial is 2.53 times less risky than Huaku Development. It trades about 0.31 of its potential returns per unit of risk. Huaku Development Co is currently generating about 0.03 per unit of risk. If you would invest 2,535 in Hua Nan Financial on September 5, 2024 and sell it today you would earn a total of 165.00 from holding Hua Nan Financial or generate 6.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hua Nan Financial vs. Huaku Development Co
Performance |
| Timeline |
| Hua Nan Financial |
| Huaku Development |
Hua Nan and Huaku Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hua Nan and Huaku Development
The main advantage of trading using opposite Hua Nan and Huaku Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Nan position performs unexpectedly, Huaku Development 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 Huaku Development will offset losses from the drop in Huaku Development's long position.| Hua Nan vs. First Financial Holding | Hua Nan vs. Mega Financial Holding | Hua Nan vs. CTBC Financial Holding | Hua Nan vs. ESUN Financial Holding |
| Huaku Development vs. Ruentex Development Co | Huaku Development vs. Taiwan Cement Corp | Huaku Development vs. Symtek Automation Asia | Huaku Development vs. CTCI 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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