Correlation Between Allied Industrial and Cheng Fwa
Can any of the company-specific risk be diversified away by investing in both Allied Industrial and Cheng Fwa 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 Allied Industrial and Cheng Fwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Industrial and Cheng Fwa Industrial, you can compare the effects of market volatilities on Allied Industrial and Cheng Fwa 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 Allied Industrial with a short position of Cheng Fwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Industrial and Cheng Fwa.
Diversification Opportunities for Allied Industrial and Cheng Fwa
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Allied and Cheng is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Allied Industrial and Cheng Fwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Fwa Industrial and Allied Industrial 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 Allied Industrial are associated (or correlated) with Cheng Fwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Fwa Industrial has no effect on the direction of Allied Industrial i.e., Allied Industrial and Cheng Fwa go up and down completely randomly.
Pair Corralation between Allied Industrial and Cheng Fwa
Assuming the 90 days trading horizon Allied Industrial is expected to generate 14.71 times less return on investment than Cheng Fwa. But when comparing it to its historical volatility, Allied Industrial is 7.91 times less risky than Cheng Fwa. It trades about 0.04 of its potential returns per unit of risk. Cheng Fwa Industrial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,135 in Cheng Fwa Industrial on September 2, 2024 and sell it today you would earn a total of 145.00 from holding Cheng Fwa Industrial or generate 4.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allied Industrial vs. Cheng Fwa Industrial
Performance |
| Timeline |
| Allied Industrial |
| Cheng Fwa Industrial |
Allied Industrial and Cheng Fwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Industrial and Cheng Fwa
The main advantage of trading using opposite Allied Industrial and Cheng Fwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Industrial position performs unexpectedly, Cheng Fwa 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 Cheng Fwa will offset losses from the drop in Cheng Fwa's long position.| Allied Industrial vs. Delta Electronics | Allied Industrial vs. China Steel Chemical | Allied Industrial vs. Hota Industrial Mfg |
| Cheng Fwa vs. Allied Industrial | Cheng Fwa vs. Tsang Yow Industrial | Cheng Fwa vs. Camellia Metal Co | Cheng Fwa vs. Advanced Wireless Semiconductor |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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