Correlation Between Chien Kuo and ALFORMER Industrial
Can any of the company-specific risk be diversified away by investing in both Chien Kuo and ALFORMER Industrial 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 Chien Kuo and ALFORMER Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chien Kuo Construction and ALFORMER Industrial Co, you can compare the effects of market volatilities on Chien Kuo and ALFORMER Industrial 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 Chien Kuo with a short position of ALFORMER Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chien Kuo and ALFORMER Industrial.
Diversification Opportunities for Chien Kuo and ALFORMER Industrial
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Chien and ALFORMER is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Chien Kuo Construction and ALFORMER Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALFORMER Industrial and Chien Kuo 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 Chien Kuo Construction are associated (or correlated) with ALFORMER Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALFORMER Industrial has no effect on the direction of Chien Kuo i.e., Chien Kuo and ALFORMER Industrial go up and down completely randomly.
Pair Corralation between Chien Kuo and ALFORMER Industrial
Assuming the 90 days trading horizon Chien Kuo Construction is expected to generate 0.52 times more return on investment than ALFORMER Industrial. However, Chien Kuo Construction is 1.91 times less risky than ALFORMER Industrial. It trades about 0.04 of its potential returns per unit of risk. ALFORMER Industrial Co is currently generating about -0.13 per unit of risk. If you would invest 2,738 in Chien Kuo Construction on November 7, 2024 and sell it today you would earn a total of 87.00 from holding Chien Kuo Construction or generate 3.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chien Kuo Construction vs. ALFORMER Industrial Co
Performance |
| Timeline |
| Chien Kuo Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| ALFORMER Industrial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Chien Kuo and ALFORMER Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chien Kuo and ALFORMER Industrial
The main advantage of trading using opposite Chien Kuo and ALFORMER Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chien Kuo position performs unexpectedly, ALFORMER Industrial 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 ALFORMER Industrial will offset losses from the drop in ALFORMER Industrial's long position.The idea behind Chien Kuo Construction and ALFORMER Industrial Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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