Correlation Between China Development and Chaheng Precision
Can any of the company-specific risk be diversified away by investing in both China Development and Chaheng Precision 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 Chaheng Precision 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 Chaheng Precision Co, you can compare the effects of market volatilities on China Development and Chaheng Precision 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 Chaheng Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Chaheng Precision.
Diversification Opportunities for China Development and Chaheng Precision
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and Chaheng is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Chaheng Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chaheng Precision 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 Chaheng Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chaheng Precision has no effect on the direction of China Development i.e., China Development and Chaheng Precision go up and down completely randomly.
Pair Corralation between China Development and Chaheng Precision
Assuming the 90 days trading horizon China Development Financial is expected to under-perform the Chaheng Precision. But the stock apears to be less risky and, when comparing its historical volatility, China Development Financial is 1.28 times less risky than Chaheng Precision. The stock trades about -0.28 of its potential returns per unit of risk. The Chaheng Precision Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 9,090 in Chaheng Precision Co on October 16, 2024 and sell it today you would earn a total of 110.00 from holding Chaheng Precision Co or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Development Financial vs. Chaheng Precision Co
Performance |
| Timeline |
| China Development |
| Chaheng Precision |
China Development and Chaheng Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Chaheng Precision
The main advantage of trading using opposite China Development and Chaheng Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Chaheng Precision 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 Chaheng Precision will offset losses from the drop in Chaheng Precision'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 |
| Chaheng Precision vs. Fulin Plastic Industry | Chaheng Precision vs. FineMat Applied Materials | Chaheng Precision vs. Yonyu Plastics Co | Chaheng Precision vs. Solar Applied Materials |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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