Correlation Between President Chain and Huaku Development
Can any of the company-specific risk be diversified away by investing in both President Chain 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 President Chain and Huaku Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between President Chain Store and Huaku Development Co, you can compare the effects of market volatilities on President Chain 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 President Chain with a short position of Huaku Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of President Chain and Huaku Development.
Diversification Opportunities for President Chain and Huaku Development
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between President and Huaku is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding President Chain Store and Huaku Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaku Development and President Chain 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 President Chain Store 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 President Chain i.e., President Chain and Huaku Development go up and down completely randomly.
Pair Corralation between President Chain and Huaku Development
Assuming the 90 days trading horizon President Chain Store is expected to under-perform the Huaku Development. But the stock apears to be less risky and, when comparing its historical volatility, President Chain Store is 1.37 times less risky than Huaku Development. The stock trades about -0.24 of its potential returns per unit of risk. The Huaku Development Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 11,850 in Huaku Development Co on August 27, 2024 and sell it today you would earn a total of 650.00 from holding Huaku Development Co or generate 5.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
President Chain Store vs. Huaku Development Co
Performance |
| Timeline |
| President Chain Store |
| Huaku Development |
President Chain and Huaku Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with President Chain and Huaku Development
The main advantage of trading using opposite President Chain and Huaku Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if President Chain 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.| President Chain vs. Taiwan Cement Corp | President Chain vs. Ruentex Development Co | President Chain vs. Symtek Automation Asia | President Chain vs. CTCI Corp |
| Huaku Development vs. Chong Hong Construction | Huaku Development vs. Highwealth Construction Corp | Huaku Development vs. Fubon Financial Holding | Huaku Development vs. CTBC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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