Correlation Between China Development and Chenming Mold
Can any of the company-specific risk be diversified away by investing in both China Development and Chenming Mold 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 Chenming Mold 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 Chenming Mold Industrial, you can compare the effects of market volatilities on China Development and Chenming Mold 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 Chenming Mold. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Chenming Mold.
Diversification Opportunities for China Development and Chenming Mold
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between China and Chenming is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Chenming Mold Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chenming Mold Industrial 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 Chenming Mold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chenming Mold Industrial has no effect on the direction of China Development i.e., China Development and Chenming Mold go up and down completely randomly.
Pair Corralation between China Development and Chenming Mold
Assuming the 90 days trading horizon China Development is expected to generate 2.48 times less return on investment than Chenming Mold. But when comparing it to its historical volatility, China Development Financial is 2.79 times less risky than Chenming Mold. It trades about 0.39 of its potential returns per unit of risk. Chenming Mold Industrial is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 12,850 in Chenming Mold Industrial on November 28, 2024 and sell it today you would earn a total of 2,100 from holding Chenming Mold Industrial or generate 16.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Development Financial vs. Chenming Mold Industrial
Performance |
| Timeline |
| China Development |
| Chenming Mold Industrial |
China Development and Chenming Mold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Chenming Mold
The main advantage of trading using opposite China Development and Chenming Mold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Chenming Mold 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 Chenming Mold will offset losses from the drop in Chenming Mold'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 |
| Chenming Mold vs. Clevo Co | Chenming Mold vs. Zinwell | Chenming Mold vs. Min Aik Technology | Chenming Mold vs. Promise Technology |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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