Correlation Between Capital Futures and China Bills
Can any of the company-specific risk be diversified away by investing in both Capital Futures and China Bills 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 Futures and China Bills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Futures Corp and China Bills Finance, you can compare the effects of market volatilities on Capital Futures and China Bills 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 Futures with a short position of China Bills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Futures and China Bills.
Diversification Opportunities for Capital Futures and China Bills
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and China is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Capital Futures Corp and China Bills Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Bills Finance and Capital Futures 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 Futures Corp are associated (or correlated) with China Bills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Bills Finance has no effect on the direction of Capital Futures i.e., Capital Futures and China Bills go up and down completely randomly.
Pair Corralation between Capital Futures and China Bills
Assuming the 90 days trading horizon Capital Futures Corp is expected to generate 2.01 times more return on investment than China Bills. However, Capital Futures is 2.01 times more volatile than China Bills Finance. It trades about 0.06 of its potential returns per unit of risk. China Bills Finance is currently generating about 0.02 per unit of risk. If you would invest 4,945 in Capital Futures Corp on September 14, 2024 and sell it today you would earn a total of 945.00 from holding Capital Futures Corp or generate 19.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Futures Corp vs. China Bills Finance
Performance |
| Timeline |
| Capital Futures Corp |
| China Bills Finance |
Capital Futures and China Bills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Futures and China Bills
The main advantage of trading using opposite Capital Futures and China Bills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Futures position performs unexpectedly, China Bills 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 Bills will offset losses from the drop in China Bills' long position.| Capital Futures vs. IBF Financial Holdings | Capital Futures vs. Capital Securities Corp | Capital Futures vs. President Securities Corp | Capital Futures vs. China Bills Finance |
| China Bills vs. Chang Hwa Commercial | China Bills vs. IBF Financial Holdings | China Bills vs. Taiwan Business Bank | China Bills vs. Yuanta Financial Holdings |
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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