Correlation Between First Financial and Huaku Development
Can any of the company-specific risk be diversified away by investing in both First Financial and Huaku 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 First Financial and Huaku Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial Holding and Huaku Development Co, you can compare the effects of market volatilities on First Financial and Huaku 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 First Financial with a short position of Huaku Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Huaku Development.
Diversification Opportunities for First Financial and Huaku Development
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Huaku is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Holding and Huaku Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaku Development and First 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 First Financial Holding are associated (or correlated) with Huaku Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaku Development has no effect on the direction of First Financial i.e., First Financial and Huaku Development go up and down completely randomly.
Pair Corralation between First Financial and Huaku Development
Assuming the 90 days trading horizon First Financial Holding is expected to generate 0.37 times more return on investment than Huaku Development. However, First Financial Holding is 2.67 times less risky than Huaku Development. It trades about 0.0 of its potential returns per unit of risk. Huaku Development Co is currently generating about -0.09 per unit of risk. If you would invest 2,780 in First Financial Holding on September 5, 2024 and sell it today you would lose (5.00) from holding First Financial Holding or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Holding vs. Huaku Development Co
Performance |
| Timeline |
| First Financial Holding |
| Huaku Development |
First Financial and Huaku Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Huaku Development
The main advantage of trading using opposite First Financial and Huaku Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Huaku 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 Huaku Development will offset losses from the drop in Huaku Development's long position.| First Financial vs. Mega Financial Holding | First Financial vs. CTBC Financial Holding | First Financial vs. Hua Nan Financial | First Financial vs. ESUN Financial Holding |
| Huaku Development vs. Ruentex Development Co | Huaku Development vs. Taiwan Cement Corp | Huaku Development vs. Symtek Automation Asia | Huaku Development vs. CTCI Corp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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