Correlation Between CHINA DEVELOPMENT and First Insurance
Can any of the company-specific risk be diversified away by investing in both CHINA DEVELOPMENT and First Insurance 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 First Insurance 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 First Insurance Co, you can compare the effects of market volatilities on CHINA DEVELOPMENT and First Insurance 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 First Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA DEVELOPMENT and First Insurance.
Diversification Opportunities for CHINA DEVELOPMENT and First Insurance
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHINA and First is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CHINA DEVELOPMENT FINANCIAL and First Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Insurance 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 First Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Insurance has no effect on the direction of CHINA DEVELOPMENT i.e., CHINA DEVELOPMENT and First Insurance go up and down completely randomly.
Pair Corralation between CHINA DEVELOPMENT and First Insurance
Assuming the 90 days trading horizon CHINA DEVELOPMENT is expected to generate 14.22 times less return on investment than First Insurance. But when comparing it to its historical volatility, CHINA DEVELOPMENT FINANCIAL is 2.55 times less risky than First Insurance. It trades about 0.02 of its potential returns per unit of risk. First Insurance Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,725 in First Insurance Co on December 24, 2024 and sell it today you would earn a total of 1,250 from holding First Insurance Co or generate 72.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
CHINA DEVELOPMENT FINANCIAL vs. First Insurance Co
Performance |
| Timeline |
| CHINA DEVELOPMENT |
| First Insurance |
CHINA DEVELOPMENT and First Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA DEVELOPMENT and First Insurance
The main advantage of trading using opposite CHINA DEVELOPMENT and First Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA DEVELOPMENT position performs unexpectedly, First Insurance 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 First Insurance will offset losses from the drop in First Insurance's long position.| CHINA DEVELOPMENT vs. STL Technology Co | CHINA DEVELOPMENT vs. Univacco Technology | CHINA DEVELOPMENT vs. Chinese Maritime Transport | CHINA DEVELOPMENT vs. Energenesis Biomedical Co |
| First Insurance vs. EnTie Commercial Bank | First Insurance vs. Union Bank of | First Insurance vs. Bank of Kaohsiung | First Insurance vs. Taiwan Business Bank |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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