Correlation Between CHINA DEVELOPMENT and Mega Financial
Can any of the company-specific risk be diversified away by investing in both CHINA DEVELOPMENT and Mega Financial 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 Mega Financial 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 Mega Financial Holding, you can compare the effects of market volatilities on CHINA DEVELOPMENT and Mega Financial 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 Mega Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA DEVELOPMENT and Mega Financial.
Diversification Opportunities for CHINA DEVELOPMENT and Mega Financial
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CHINA and Mega is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CHINA DEVELOPMENT FINANCIAL and Mega Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mega Financial Holding 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 Mega Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mega Financial Holding has no effect on the direction of CHINA DEVELOPMENT i.e., CHINA DEVELOPMENT and Mega Financial go up and down completely randomly.
Pair Corralation between CHINA DEVELOPMENT and Mega Financial
Assuming the 90 days trading horizon CHINA DEVELOPMENT FINANCIAL is expected to generate 0.34 times more return on investment than Mega Financial. However, CHINA DEVELOPMENT FINANCIAL is 2.94 times less risky than Mega Financial. It trades about 0.16 of its potential returns per unit of risk. Mega Financial Holding is currently generating about 0.01 per unit of risk. If you would invest 714.00 in CHINA DEVELOPMENT FINANCIAL on September 1, 2024 and sell it today you would earn a total of 64.00 from holding CHINA DEVELOPMENT FINANCIAL or generate 8.96% 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. Mega Financial Holding
Performance |
| Timeline |
| CHINA DEVELOPMENT |
| Mega Financial Holding |
CHINA DEVELOPMENT and Mega Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA DEVELOPMENT and Mega Financial
The main advantage of trading using opposite CHINA DEVELOPMENT and Mega Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA DEVELOPMENT position performs unexpectedly, Mega Financial 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 Mega Financial will offset losses from the drop in Mega Financial's long position.| CHINA DEVELOPMENT vs. Fubon Financial Holding | CHINA DEVELOPMENT vs. YuantaP shares Taiwan Mid Cap | CHINA DEVELOPMENT vs. YuantaP shares Taiwan Electronics | CHINA DEVELOPMENT vs. YuantaP shares Taiwan Top |
| Mega Financial vs. Central Reinsurance Corp | Mega Financial vs. Huaku Development Co | Mega Financial vs. Fubon Financial Holding |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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