Correlation Between Mega Financial and China Development
Can any of the company-specific risk be diversified away by investing in both Mega Financial and China Development 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 Mega Financial and China Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mega Financial Holding and China Development Financial, you can compare the effects of market volatilities on Mega Financial and China Development 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 Mega Financial with a short position of China Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mega Financial and China Development.
Diversification Opportunities for Mega Financial and China Development
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Mega and China is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Mega Financial Holding and China Development Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Development and Mega Financial 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 Mega Financial Holding are associated (or correlated) with China Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Development has no effect on the direction of Mega Financial i.e., Mega Financial and China Development go up and down completely randomly.
Pair Corralation between Mega Financial and China Development
Assuming the 90 days trading horizon Mega Financial is expected to generate 1.9 times less return on investment than China Development. But when comparing it to its historical volatility, Mega Financial Holding is 1.33 times less risky than China Development. It trades about 0.08 of its potential returns per unit of risk. China Development Financial is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,675 in China Development Financial on August 31, 2024 and sell it today you would earn a total of 45.00 from holding China Development Financial or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mega Financial Holding vs. China Development Financial
Performance |
| Timeline |
| Mega Financial Holding |
| China Development |
Mega Financial and China Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mega Financial and China Development
The main advantage of trading using opposite Mega Financial and China Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mega Financial position performs unexpectedly, China Development 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 China Development will offset losses from the drop in China Development's long position.| Mega Financial vs. Central Reinsurance Corp | Mega Financial vs. Huaku Development Co | Mega Financial vs. Fubon Financial Holding | Mega Financial vs. CTBC Financial Holding |
| China Development vs. Cathay Financial Holding | China Development vs. Mega Financial Holding | China Development vs. CTBC Financial Holding | China Development 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Transaction History View history of all your transactions and understand their impact on performance |