Correlation Between China Development and Lucky Cement
Can any of the company-specific risk be diversified away by investing in both China Development and Lucky Cement 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 China Development and Lucky Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Development Financial and Lucky Cement Co, you can compare the effects of market volatilities on China Development and Lucky Cement 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 China Development with a short position of Lucky Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Lucky Cement.
Diversification Opportunities for China Development and Lucky Cement
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Lucky is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Lucky Cement Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucky Cement and China 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 China Development Financial are associated (or correlated) with Lucky Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucky Cement has no effect on the direction of China Development i.e., China Development and Lucky Cement go up and down completely randomly.
Pair Corralation between China Development and Lucky Cement
Assuming the 90 days trading horizon China Development Financial is expected to generate 1.76 times more return on investment than Lucky Cement. However, China Development is 1.76 times more volatile than Lucky Cement Co. It trades about 0.14 of its potential returns per unit of risk. Lucky Cement Co is currently generating about -0.12 per unit of risk. If you would invest 1,665 in China Development Financial on August 30, 2024 and sell it today you would earn a total of 55.00 from holding China Development Financial or generate 3.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Development Financial vs. Lucky Cement Co
Performance |
| Timeline |
| China Development |
| Lucky Cement |
China Development and Lucky Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Lucky Cement
The main advantage of trading using opposite China Development and Lucky Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Lucky Cement 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 Lucky Cement will offset losses from the drop in Lucky Cement's long position.| China Development vs. Cathay Financial Holding | China Development vs. Mega Financial Holding | China Development vs. CTBC Financial Holding | China Development vs. Fubon Financial Holding |
| Lucky Cement vs. Universal Cement Corp | Lucky Cement vs. Chia Hsin Cement | Lucky Cement vs. Hsing Ta Cement | Lucky Cement vs. Asia Cement 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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