Correlation Between Chong Hong and Farglory Land
Can any of the company-specific risk be diversified away by investing in both Chong Hong and Farglory Land 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 Chong Hong and Farglory Land into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chong Hong Construction and Farglory Land Development, you can compare the effects of market volatilities on Chong Hong and Farglory Land 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 Chong Hong with a short position of Farglory Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chong Hong and Farglory Land.
Diversification Opportunities for Chong Hong and Farglory Land
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Chong and Farglory is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Chong Hong Construction and Farglory Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farglory Land Development and Chong Hong 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 Chong Hong Construction are associated (or correlated) with Farglory Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farglory Land Development has no effect on the direction of Chong Hong i.e., Chong Hong and Farglory Land go up and down completely randomly.
Pair Corralation between Chong Hong and Farglory Land
Assuming the 90 days trading horizon Chong Hong Construction is expected to under-perform the Farglory Land. But the stock apears to be less risky and, when comparing its historical volatility, Chong Hong Construction is 1.41 times less risky than Farglory Land. The stock trades about -0.15 of its potential returns per unit of risk. The Farglory Land Development is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 7,510 in Farglory Land Development on November 2, 2024 and sell it today you would lose (10.00) from holding Farglory Land Development or give up 0.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chong Hong Construction vs. Farglory Land Development
Performance |
| Timeline |
| Chong Hong Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Farglory Land Development |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Chong Hong and Farglory Land Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chong Hong and Farglory Land
The main advantage of trading using opposite Chong Hong and Farglory Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chong Hong position performs unexpectedly, Farglory Land 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 Farglory Land will offset losses from the drop in Farglory Land's long position.The idea behind Chong Hong Construction and Farglory Land Development 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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