Correlation Between Adata Technology and Chung Fu
Can any of the company-specific risk be diversified away by investing in both Adata Technology and Chung Fu 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 Adata Technology and Chung Fu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adata Technology Co and Chung Fu Tex International, you can compare the effects of market volatilities on Adata Technology and Chung Fu 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 Adata Technology with a short position of Chung Fu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adata Technology and Chung Fu.
Diversification Opportunities for Adata Technology and Chung Fu
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Adata and Chung is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Adata Technology Co and Chung Fu Tex International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Fu Tex and Adata Technology 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 Adata Technology Co are associated (or correlated) with Chung Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Fu Tex has no effect on the direction of Adata Technology i.e., Adata Technology and Chung Fu go up and down completely randomly.
Pair Corralation between Adata Technology and Chung Fu
Assuming the 90 days trading horizon Adata Technology Co is expected to under-perform the Chung Fu. But the stock apears to be less risky and, when comparing its historical volatility, Adata Technology Co is 1.08 times less risky than Chung Fu. The stock trades about -0.03 of its potential returns per unit of risk. The Chung Fu Tex International is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 3,445 in Chung Fu Tex International on November 8, 2024 and sell it today you would earn a total of 345.00 from holding Chung Fu Tex International or generate 10.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 93.75% |
| Values | Daily Returns |
Adata Technology Co vs. Chung Fu Tex International
Performance |
| Timeline |
| Adata Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chung Fu Tex |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Adata Technology and Chung Fu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adata Technology and Chung Fu
The main advantage of trading using opposite Adata Technology and Chung Fu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adata Technology position performs unexpectedly, Chung Fu 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 Chung Fu will offset losses from the drop in Chung Fu's long position.The idea behind Adata Technology Co and Chung Fu Tex International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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