Correlation Between ADLINK Technology and China Times

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Can any of the company-specific risk be diversified away by investing in both ADLINK Technology and China Times 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 ADLINK Technology and China Times into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADLINK Technology and China Times Publishing, you can compare the effects of market volatilities on ADLINK Technology and China Times 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 ADLINK Technology with a short position of China Times. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADLINK Technology and China Times.

Diversification Opportunities for ADLINK Technology and China Times

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ADLINK and China is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ADLINK Technology and China Times Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Times Publishing and ADLINK Technology 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 ADLINK Technology are associated (or correlated) with China Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Times Publishing has no effect on the direction of ADLINK Technology i.e., ADLINK Technology and China Times go up and down completely randomly.

Pair Corralation between ADLINK Technology and China Times

Assuming the 90 days trading horizon ADLINK Technology is expected to under-perform the China Times. But the stock apears to be less risky and, when comparing its historical volatility, ADLINK Technology is 1.06 times less risky than China Times. The stock trades about -0.04 of its potential returns per unit of risk. The China Times Publishing is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,970  in China Times Publishing on November 7, 2024 and sell it today you would lose (15.00) from holding China Times Publishing or give up 0.76% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ADLINK Technology  vs.  China Times Publishing

 Performance 
       Timeline  
ADLINK Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
OK
Over the last 90 days ADLINK Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, ADLINK Technology showed solid returns over the last few months and may actually be approaching a breakup point.
China Times Publishing 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days China Times Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, China Times may actually be approaching a critical reversion point that can send shares even higher in March 2025.

ADLINK Technology and China Times Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ADLINK Technology and China Times

The main advantage of trading using opposite ADLINK Technology and China Times positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADLINK Technology position performs unexpectedly, China Times 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 Times will offset losses from the drop in China Times' long position.
The idea behind ADLINK Technology and China Times Publishing 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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