Correlation Between Founding Construction and Chien Kuo
Can any of the company-specific risk be diversified away by investing in both Founding Construction and Chien Kuo 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 Founding Construction and Chien Kuo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Founding Construction Development and Chien Kuo Construction, you can compare the effects of market volatilities on Founding Construction and Chien Kuo 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 Founding Construction with a short position of Chien Kuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Founding Construction and Chien Kuo.
Diversification Opportunities for Founding Construction and Chien Kuo
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Founding and Chien is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Founding Construction Developm and Chien Kuo Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chien Kuo Construction and Founding Construction 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 Founding Construction Development are associated (or correlated) with Chien Kuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chien Kuo Construction has no effect on the direction of Founding Construction i.e., Founding Construction and Chien Kuo go up and down completely randomly.
Pair Corralation between Founding Construction and Chien Kuo
Assuming the 90 days trading horizon Founding Construction is expected to generate 2.73 times less return on investment than Chien Kuo. But when comparing it to its historical volatility, Founding Construction Development is 2.7 times less risky than Chien Kuo. It trades about 0.1 of its potential returns per unit of risk. Chien Kuo Construction is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,543 in Chien Kuo Construction on August 30, 2024 and sell it today you would earn a total of 157.00 from holding Chien Kuo Construction or generate 6.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Founding Construction Developm vs. Chien Kuo Construction
Performance |
| Timeline |
| Founding Construction |
| Chien Kuo Construction |
Founding Construction and Chien Kuo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Founding Construction and Chien Kuo
The main advantage of trading using opposite Founding Construction and Chien Kuo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Founding Construction position performs unexpectedly, Chien Kuo 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 Chien Kuo will offset losses from the drop in Chien Kuo's long position.| Founding Construction vs. Tainan Spinning Co | Founding Construction vs. Carnival Industrial Corp | Founding Construction vs. Symtek Automation Asia | Founding Construction vs. CTCI Corp |
| Chien Kuo vs. Yulon Motor Co | Chien Kuo vs. Far Eastern Department | Chien Kuo vs. China Steel Corp | Chien Kuo vs. Chang Hwa Commercial |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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