Correlation Between China Development and Sinopac Financial
Can any of the company-specific risk be diversified away by investing in both China Development and Sinopac Financial 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 Sinopac Financial 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 Sinopac Financial Holdings, you can compare the effects of market volatilities on China Development and Sinopac Financial 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 Sinopac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Sinopac Financial.
Diversification Opportunities for China Development and Sinopac Financial
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Sinopac is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Sinopac Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopac Financial 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 Sinopac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopac Financial has no effect on the direction of China Development i.e., China Development and Sinopac Financial go up and down completely randomly.
Pair Corralation between China Development and Sinopac Financial
Assuming the 90 days trading horizon China Development Financial is expected to under-perform the Sinopac Financial. In addition to that, China Development is 1.75 times more volatile than Sinopac Financial Holdings. It trades about -0.13 of its total potential returns per unit of risk. Sinopac Financial Holdings is currently generating about -0.18 per unit of volatility. If you would invest 2,340 in Sinopac Financial Holdings on October 23, 2024 and sell it today you would lose (65.00) from holding Sinopac Financial Holdings or give up 2.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Development Financial vs. Sinopac Financial Holdings
Performance |
| Timeline |
| China Development |
| Sinopac Financial |
China Development and Sinopac Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Sinopac Financial
The main advantage of trading using opposite China Development and Sinopac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Sinopac Financial 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 Sinopac Financial will offset losses from the drop in Sinopac Financial'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 |
| Sinopac Financial vs. Taichung Commercial Bank | Sinopac Financial vs. Far Eastern International | Sinopac Financial vs. Taiwan Business Bank | Sinopac Financial vs. Yuanta Financial Holdings |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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