Correlation Between Information Technology and Chong Hong
Can any of the company-specific risk be diversified away by investing in both Information Technology and Chong Hong 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 Information Technology and Chong Hong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Information Technology Total and Chong Hong Construction, you can compare the effects of market volatilities on Information Technology and Chong Hong 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 Information Technology with a short position of Chong Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and Chong Hong.
Diversification Opportunities for Information Technology and Chong Hong
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Information and Chong is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and Chong Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chong Hong Construction and Information 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 Information Technology Total are associated (or correlated) with Chong Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chong Hong Construction has no effect on the direction of Information Technology i.e., Information Technology and Chong Hong go up and down completely randomly.
Pair Corralation between Information Technology and Chong Hong
Assuming the 90 days trading horizon Information Technology Total is expected to under-perform the Chong Hong. But the stock apears to be less risky and, when comparing its historical volatility, Information Technology Total is 1.44 times less risky than Chong Hong. The stock trades about -0.23 of its potential returns per unit of risk. The Chong Hong Construction is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8,750 in Chong Hong Construction on September 1, 2024 and sell it today you would earn a total of 200.00 from holding Chong Hong Construction or generate 2.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Information Technology Total vs. Chong Hong Construction
Performance |
| Timeline |
| Information Technology |
| Chong Hong Construction |
Information Technology and Chong Hong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Information Technology and Chong Hong
The main advantage of trading using opposite Information Technology and Chong Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Technology position performs unexpectedly, Chong Hong 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 Chong Hong will offset losses from the drop in Chong Hong's long position.The idea behind Information Technology Total and Chong Hong Construction 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.
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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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