Correlation Between China Development and Alchip Technologies
Can any of the company-specific risk be diversified away by investing in both China Development and Alchip Technologies 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 Alchip Technologies 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 Alchip Technologies, you can compare the effects of market volatilities on China Development and Alchip Technologies 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 Alchip Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Alchip Technologies.
Diversification Opportunities for China Development and Alchip Technologies
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Alchip is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Alchip Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alchip Technologies 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 Alchip Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alchip Technologies has no effect on the direction of China Development i.e., China Development and Alchip Technologies go up and down completely randomly.
Pair Corralation between China Development and Alchip Technologies
Assuming the 90 days trading horizon China Development is expected to generate 11.34 times less return on investment than Alchip Technologies. But when comparing it to its historical volatility, China Development Financial is 3.23 times less risky than Alchip Technologies. It trades about 0.08 of its potential returns per unit of risk. Alchip Technologies is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 189,500 in Alchip Technologies on August 27, 2024 and sell it today you would earn a total of 42,000 from holding Alchip Technologies or generate 22.16% 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. Alchip Technologies
Performance |
| Timeline |
| China Development |
| Alchip Technologies |
China Development and Alchip Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Alchip Technologies
The main advantage of trading using opposite China Development and Alchip Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Alchip Technologies 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 Alchip Technologies will offset losses from the drop in Alchip Technologies' 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 |
| Alchip Technologies vs. Global Unichip Corp | Alchip Technologies vs. Asmedia Technology | Alchip Technologies vs. Unimicron Technology Corp | Alchip Technologies vs. Novatek Microelectronics 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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