Correlation Between Daxin Materials and Cheng Mei
Can any of the company-specific risk be diversified away by investing in both Daxin Materials and Cheng Mei 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 Daxin Materials and Cheng Mei into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daxin Materials Corp and Cheng Mei Materials, you can compare the effects of market volatilities on Daxin Materials and Cheng Mei 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 Daxin Materials with a short position of Cheng Mei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daxin Materials and Cheng Mei.
Diversification Opportunities for Daxin Materials and Cheng Mei
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Daxin and Cheng is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Daxin Materials Corp and Cheng Mei Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Mei Materials and Daxin Materials 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 Daxin Materials Corp are associated (or correlated) with Cheng Mei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Mei Materials has no effect on the direction of Daxin Materials i.e., Daxin Materials and Cheng Mei go up and down completely randomly.
Pair Corralation between Daxin Materials and Cheng Mei
Assuming the 90 days trading horizon Daxin Materials Corp is expected to generate 1.77 times more return on investment than Cheng Mei. However, Daxin Materials is 1.77 times more volatile than Cheng Mei Materials. It trades about 0.05 of its potential returns per unit of risk. Cheng Mei Materials is currently generating about -0.01 per unit of risk. If you would invest 15,800 in Daxin Materials Corp on October 13, 2024 and sell it today you would earn a total of 3,550 from holding Daxin Materials Corp or generate 22.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daxin Materials Corp vs. Cheng Mei Materials
Performance |
| Timeline |
| Daxin Materials Corp |
| Cheng Mei Materials |
Daxin Materials and Cheng Mei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daxin Materials and Cheng Mei
The main advantage of trading using opposite Daxin Materials and Cheng Mei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daxin Materials position performs unexpectedly, Cheng Mei 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 Mei will offset losses from the drop in Cheng Mei's long position.| Daxin Materials vs. Basso Industry Corp | Daxin Materials vs. Chung Hsin Electric Machinery | Daxin Materials vs. TECO Electric Machinery |
| Cheng Mei vs. Holy Stone Enterprise | Cheng Mei vs. Walsin Technology Corp | Cheng Mei vs. Yageo Corp | Cheng Mei vs. HannStar Board 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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