Correlation Between Cheng Mei and PlayNitride
Can any of the company-specific risk be diversified away by investing in both Cheng Mei and PlayNitride 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 Cheng Mei and PlayNitride into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheng Mei Materials and PlayNitride, you can compare the effects of market volatilities on Cheng Mei and PlayNitride 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 Cheng Mei with a short position of PlayNitride. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Mei and PlayNitride.
Diversification Opportunities for Cheng Mei and PlayNitride
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cheng and PlayNitride is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Mei Materials and PlayNitride in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PlayNitride and Cheng Mei 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 Cheng Mei Materials are associated (or correlated) with PlayNitride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PlayNitride has no effect on the direction of Cheng Mei i.e., Cheng Mei and PlayNitride go up and down completely randomly.
Pair Corralation between Cheng Mei and PlayNitride
Assuming the 90 days trading horizon Cheng Mei is expected to generate 7.87 times less return on investment than PlayNitride. But when comparing it to its historical volatility, Cheng Mei Materials is 4.62 times less risky than PlayNitride. It trades about 0.17 of its potential returns per unit of risk. PlayNitride is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 16,600 in PlayNitride on October 22, 2024 and sell it today you would earn a total of 4,750 from holding PlayNitride or generate 28.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheng Mei Materials vs. PlayNitride
Performance |
| Timeline |
| Cheng Mei Materials |
| PlayNitride |
Cheng Mei and PlayNitride Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheng Mei and PlayNitride
The main advantage of trading using opposite Cheng Mei and PlayNitride positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheng Mei position performs unexpectedly, PlayNitride 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 PlayNitride will offset losses from the drop in PlayNitride's long position.| Cheng Mei vs. Wistron Information Technology | Cheng Mei vs. Phytohealth Corp | Cheng Mei vs. Shanghai Commercial Savings | Cheng Mei vs. Johnson Health Tech |
| PlayNitride vs. Chernan Metal Industrial | PlayNitride vs. Camellia Metal Co | PlayNitride vs. Softstar Entertainment | PlayNitride vs. Phytohealth Corp |
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 Stocks Directory module to find actively traded stocks across global markets.
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