Correlation Between China Development and Chong Hong
Can any of the company-specific risk be diversified away by investing in both China Development and Chong Hong 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 Chong Hong 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 Chong Hong Construction, you can compare the effects of market volatilities on China Development and Chong Hong 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 Chong Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Chong Hong.
Diversification Opportunities for China Development and Chong Hong
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Chong is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Chong Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chong Hong Construction 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 Chong Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chong Hong Construction has no effect on the direction of China Development i.e., China Development and Chong Hong go up and down completely randomly.
Pair Corralation between China Development and Chong Hong
Assuming the 90 days trading horizon China Development Financial is expected to generate 0.45 times more return on investment than Chong Hong. However, China Development Financial is 2.22 times less risky than Chong Hong. It trades about 0.14 of its potential returns per unit of risk. Chong Hong Construction is currently generating about 0.03 per unit of risk. If you would invest 1,665 in China Development Financial on August 30, 2024 and sell it today you would earn a total of 55.00 from holding China Development Financial or generate 3.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Development Financial vs. Chong Hong Construction
Performance |
| Timeline |
| China Development |
| Chong Hong Construction |
China Development and Chong Hong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Chong Hong
The main advantage of trading using opposite China Development and Chong Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Chong Hong 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 Chong Hong will offset losses from the drop in Chong Hong'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 |
| Chong Hong vs. Tainan Spinning Co | Chong Hong vs. Carnival Industrial Corp | Chong Hong vs. Symtek Automation Asia | Chong Hong vs. CTCI 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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