Correlation Between China Development and Faraday Technology
Can any of the company-specific risk be diversified away by investing in both China Development and Faraday Technology 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 Faraday Technology 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 Faraday Technology Corp, you can compare the effects of market volatilities on China Development and Faraday Technology 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 Faraday Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Faraday Technology.
Diversification Opportunities for China Development and Faraday Technology
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Faraday is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Faraday Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Technology Corp 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 Faraday Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Technology Corp has no effect on the direction of China Development i.e., China Development and Faraday Technology go up and down completely randomly.
Pair Corralation between China Development and Faraday Technology
Assuming the 90 days trading horizon China Development is expected to generate 1.55 times less return on investment than Faraday Technology. But when comparing it to its historical volatility, China Development Financial is 2.37 times less risky than Faraday Technology. It trades about 0.39 of its potential returns per unit of risk. Faraday Technology Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 21,750 in Faraday Technology Corp on November 28, 2024 and sell it today you would earn a total of 2,150 from holding Faraday Technology Corp or generate 9.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Development Financial vs. Faraday Technology Corp
Performance |
| Timeline |
| China Development |
| Faraday Technology Corp |
China Development and Faraday Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Faraday Technology
The main advantage of trading using opposite China Development and Faraday Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Faraday Technology 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 Faraday Technology will offset losses from the drop in Faraday Technology'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 |
| Faraday Technology vs. Global Unichip Corp | Faraday Technology vs. Novatek Microelectronics Corp | Faraday Technology vs. Realtek Semiconductor Corp | Faraday Technology vs. Unimicron Technology 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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