Correlation Between Capital Securities and China Development
Can any of the company-specific risk be diversified away by investing in both Capital Securities and China Development 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 Capital Securities and China Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Securities Corp and China Development Financial, you can compare the effects of market volatilities on Capital Securities and China Development 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 Capital Securities with a short position of China Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Securities and China Development.
Diversification Opportunities for Capital Securities and China Development
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and China is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Capital Securities Corp and China Development Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Development and Capital Securities 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 Capital Securities Corp are associated (or correlated) with China Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Development has no effect on the direction of Capital Securities i.e., Capital Securities and China Development go up and down completely randomly.
Pair Corralation between Capital Securities and China Development
Assuming the 90 days trading horizon Capital Securities Corp is expected to generate 1.21 times more return on investment than China Development. However, Capital Securities is 1.21 times more volatile than China Development Financial. It trades about 0.09 of its potential returns per unit of risk. China Development Financial is currently generating about 0.05 per unit of risk. If you would invest 1,150 in Capital Securities Corp on August 30, 2024 and sell it today you would earn a total of 1,030 from holding Capital Securities Corp or generate 89.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Securities Corp vs. China Development Financial
Performance |
| Timeline |
| Capital Securities Corp |
| China Development |
Capital Securities and China Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Securities and China Development
The main advantage of trading using opposite Capital Securities and China Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Securities position performs unexpectedly, China Development 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 China Development will offset losses from the drop in China Development's long position.| Capital Securities vs. Taiwan Secom Co | Capital Securities vs. TTET Union Corp | Capital Securities vs. China Steel Chemical | Capital Securities vs. Taiwan Shin Kong |
| China Development vs. Cathay Financial Holding | China Development vs. Mega Financial Holding | China Development vs. CTBC Financial Holding | China Development vs. Fubon Financial Holding |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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