Correlation Between China Development and BizLink Holding
Can any of the company-specific risk be diversified away by investing in both China Development and BizLink Holding 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 BizLink Holding 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 BizLink Holding, you can compare the effects of market volatilities on China Development and BizLink Holding 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 BizLink Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and BizLink Holding.
Diversification Opportunities for China Development and BizLink Holding
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and BizLink is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and BizLink Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BizLink Holding 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 BizLink Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BizLink Holding has no effect on the direction of China Development i.e., China Development and BizLink Holding go up and down completely randomly.
Pair Corralation between China Development and BizLink Holding
Assuming the 90 days trading horizon China Development Financial is expected to under-perform the BizLink Holding. But the stock apears to be less risky and, when comparing its historical volatility, China Development Financial is 2.63 times less risky than BizLink Holding. The stock trades about -0.13 of its potential returns per unit of risk. The BizLink Holding is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 61,300 in BizLink Holding on October 23, 2024 and sell it today you would lose (100.00) from holding BizLink Holding or give up 0.16% 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. BizLink Holding
Performance |
| Timeline |
| China Development |
| BizLink Holding |
China Development and BizLink Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and BizLink Holding
The main advantage of trading using opposite China Development and BizLink Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, BizLink Holding 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 BizLink Holding will offset losses from the drop in BizLink Holding'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 |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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