Correlation Between Continental Holdings and Chien Kuo
Can any of the company-specific risk be diversified away by investing in both Continental Holdings and Chien Kuo 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 Continental Holdings and Chien Kuo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Continental Holdings Corp and Chien Kuo Construction, you can compare the effects of market volatilities on Continental Holdings and Chien Kuo 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 Continental Holdings with a short position of Chien Kuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental Holdings and Chien Kuo.
Diversification Opportunities for Continental Holdings and Chien Kuo
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Continental and Chien is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Continental Holdings Corp and Chien Kuo Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chien Kuo Construction and Continental Holdings 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 Continental Holdings Corp are associated (or correlated) with Chien Kuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chien Kuo Construction has no effect on the direction of Continental Holdings i.e., Continental Holdings and Chien Kuo go up and down completely randomly.
Pair Corralation between Continental Holdings and Chien Kuo
Assuming the 90 days trading horizon Continental Holdings is expected to generate 3.91 times less return on investment than Chien Kuo. But when comparing it to its historical volatility, Continental Holdings Corp is 1.34 times less risky than Chien Kuo. It trades about 0.03 of its potential returns per unit of risk. Chien Kuo Construction is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,750 in Chien Kuo Construction on November 3, 2024 and sell it today you would earn a total of 1,025 from holding Chien Kuo Construction or generate 58.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Continental Holdings Corp vs. Chien Kuo Construction
Performance |
| Timeline |
| Continental Holdings Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Chien Kuo Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Continental Holdings and Chien Kuo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Continental Holdings and Chien Kuo
The main advantage of trading using opposite Continental Holdings and Chien Kuo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental Holdings position performs unexpectedly, Chien Kuo 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 Chien Kuo will offset losses from the drop in Chien Kuo's long position.The idea behind Continental Holdings Corp and Chien Kuo Construction 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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