Correlation Between CHINA DEVELOPMENT and Louisa Professional
Can any of the company-specific risk be diversified away by investing in both CHINA DEVELOPMENT and Louisa Professional 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 Louisa Professional 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 Louisa Professional Coffee, you can compare the effects of market volatilities on CHINA DEVELOPMENT and Louisa Professional 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 Louisa Professional. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA DEVELOPMENT and Louisa Professional.
Diversification Opportunities for CHINA DEVELOPMENT and Louisa Professional
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CHINA and Louisa is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding CHINA DEVELOPMENT FINANCIAL and Louisa Professional Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Louisa Professional 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 Louisa Professional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Louisa Professional has no effect on the direction of CHINA DEVELOPMENT i.e., CHINA DEVELOPMENT and Louisa Professional go up and down completely randomly.
Pair Corralation between CHINA DEVELOPMENT and Louisa Professional
Assuming the 90 days trading horizon CHINA DEVELOPMENT FINANCIAL is expected to generate 0.61 times more return on investment than Louisa Professional. However, CHINA DEVELOPMENT FINANCIAL is 1.65 times less risky than Louisa Professional. It trades about 0.17 of its potential returns per unit of risk. Louisa Professional Coffee is currently generating about -0.34 per unit of risk. If you would invest 758.00 in CHINA DEVELOPMENT FINANCIAL on August 30, 2024 and sell it today you would earn a total of 20.00 from holding CHINA DEVELOPMENT FINANCIAL or generate 2.64% 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. Louisa Professional Coffee
Performance |
| Timeline |
| CHINA DEVELOPMENT |
| Louisa Professional |
CHINA DEVELOPMENT and Louisa Professional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA DEVELOPMENT and Louisa Professional
The main advantage of trading using opposite CHINA DEVELOPMENT and Louisa Professional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA DEVELOPMENT position performs unexpectedly, Louisa Professional 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 Louisa Professional will offset losses from the drop in Louisa Professional's long position.| CHINA DEVELOPMENT vs. Fubon Financial Holding | CHINA DEVELOPMENT vs. CTBC Financial Holding | CHINA DEVELOPMENT vs. YuantaP shares Taiwan Electronics | CHINA DEVELOPMENT vs. YuantaP shares Taiwan Top |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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