Correlation Between ZongTai Real and Huaku Development
Can any of the company-specific risk be diversified away by investing in both ZongTai Real 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 ZongTai Real and Huaku Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ZongTai Real Estate and Huaku Development Co, you can compare the effects of market volatilities on ZongTai Real 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 ZongTai Real with a short position of Huaku Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZongTai Real and Huaku Development.
Diversification Opportunities for ZongTai Real and Huaku Development
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ZongTai and Huaku is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ZongTai Real Estate and Huaku Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaku Development and ZongTai Real 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 ZongTai Real Estate 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 ZongTai Real i.e., ZongTai Real and Huaku Development go up and down completely randomly.
Pair Corralation between ZongTai Real and Huaku Development
Assuming the 90 days trading horizon ZongTai Real Estate is expected to generate 1.57 times more return on investment than Huaku Development. However, ZongTai Real is 1.57 times more volatile than Huaku Development Co. It trades about 0.05 of its potential returns per unit of risk. Huaku Development Co is currently generating about 0.05 per unit of risk. If you would invest 1,918 in ZongTai Real Estate on September 3, 2024 and sell it today you would earn a total of 1,517 from holding ZongTai Real Estate or generate 79.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ZongTai Real Estate vs. Huaku Development Co
Performance |
| Timeline |
| ZongTai Real Estate |
| Huaku Development |
ZongTai Real and Huaku Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ZongTai Real and Huaku Development
The main advantage of trading using opposite ZongTai Real and Huaku Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZongTai Real 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.| ZongTai Real vs. Lian Hwa Foods | ZongTai Real vs. Ever Clear Environmental Eng | ZongTai Real vs. Standard Foods Corp | ZongTai Real vs. Mechema Chemicals Int |
| 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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