Correlation Between China Development and Brighten Optix
Can any of the company-specific risk be diversified away by investing in both China Development and Brighten Optix 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 Brighten Optix 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 Brighten Optix, you can compare the effects of market volatilities on China Development and Brighten Optix 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 Brighten Optix. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Brighten Optix.
Diversification Opportunities for China Development and Brighten Optix
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Brighten is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Brighten Optix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighten Optix 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 Brighten Optix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brighten Optix has no effect on the direction of China Development i.e., China Development and Brighten Optix go up and down completely randomly.
Pair Corralation between China Development and Brighten Optix
Assuming the 90 days trading horizon China Development Financial is expected to generate 0.55 times more return on investment than Brighten Optix. However, China Development Financial is 1.81 times less risky than Brighten Optix. It trades about 0.26 of its potential returns per unit of risk. Brighten Optix is currently generating about -0.05 per unit of risk. If you would invest 1,715 in China Development Financial on September 13, 2024 and sell it today you would earn a total of 85.00 from holding China Development Financial or generate 4.96% 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. Brighten Optix
Performance |
| Timeline |
| China Development |
| Brighten Optix |
China Development and Brighten Optix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Brighten Optix
The main advantage of trading using opposite China Development and Brighten Optix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Brighten Optix 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 Brighten Optix will offset losses from the drop in Brighten Optix's long position.| China Development vs. Central Reinsurance Corp | China Development vs. Huaku Development Co | China Development vs. Fubon Financial Holding | China Development vs. Chailease Holding Co |
| Brighten Optix vs. Universal Vision Biotechnology | Brighten Optix vs. Excelsior Medical Co | Brighten Optix vs. Pacific Hospital Supply | Brighten Optix vs. Ruentex Development Co |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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