Correlation Between Cheng Fwa and AVY Precision
Can any of the company-specific risk be diversified away by investing in both Cheng Fwa and AVY Precision 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 Fwa and AVY Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheng Fwa Industrial and AVY Precision Technology, you can compare the effects of market volatilities on Cheng Fwa and AVY Precision 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 Fwa with a short position of AVY Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Fwa and AVY Precision.
Diversification Opportunities for Cheng Fwa and AVY Precision
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cheng and AVY is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Fwa Industrial and AVY Precision Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVY Precision Technology and Cheng Fwa 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 Fwa Industrial are associated (or correlated) with AVY Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVY Precision Technology has no effect on the direction of Cheng Fwa i.e., Cheng Fwa and AVY Precision go up and down completely randomly.
Pair Corralation between Cheng Fwa and AVY Precision
Assuming the 90 days trading horizon Cheng Fwa Industrial is expected to under-perform the AVY Precision. But the stock apears to be less risky and, when comparing its historical volatility, Cheng Fwa Industrial is 1.0 times less risky than AVY Precision. The stock trades about -0.06 of its potential returns per unit of risk. The AVY Precision Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,345 in AVY Precision Technology on November 4, 2024 and sell it today you would earn a total of 10.00 from holding AVY Precision Technology or generate 0.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheng Fwa Industrial vs. AVY Precision Technology
Performance |
| Timeline |
| Cheng Fwa Industrial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| AVY Precision Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cheng Fwa and AVY Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheng Fwa and AVY Precision
The main advantage of trading using opposite Cheng Fwa and AVY Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheng Fwa position performs unexpectedly, AVY Precision 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 AVY Precision will offset losses from the drop in AVY Precision's long position.The idea behind Cheng Fwa Industrial and AVY Precision Technology 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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