Correlation Between Sports Gear and Chi Hua
Can any of the company-specific risk be diversified away by investing in both Sports Gear and Chi Hua 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 Sports Gear and Chi Hua into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sports Gear Co and Chi Hua Fitness, you can compare the effects of market volatilities on Sports Gear and Chi Hua 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 Sports Gear with a short position of Chi Hua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sports Gear and Chi Hua.
Diversification Opportunities for Sports Gear and Chi Hua
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sports and Chi is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sports Gear Co and Chi Hua Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Hua Fitness and Sports Gear 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 Sports Gear Co are associated (or correlated) with Chi Hua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Hua Fitness has no effect on the direction of Sports Gear i.e., Sports Gear and Chi Hua go up and down completely randomly.
Pair Corralation between Sports Gear and Chi Hua
Assuming the 90 days trading horizon Sports Gear is expected to generate 2.85 times less return on investment than Chi Hua. But when comparing it to its historical volatility, Sports Gear Co is 8.84 times less risky than Chi Hua. It trades about 0.09 of its potential returns per unit of risk. Chi Hua Fitness is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,576 in Chi Hua Fitness on August 26, 2024 and sell it today you would lose (2,826) from holding Chi Hua Fitness or give up 42.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sports Gear Co vs. Chi Hua Fitness
Performance |
| Timeline |
| Sports Gear |
| Chi Hua Fitness |
Sports Gear and Chi Hua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sports Gear and Chi Hua
The main advantage of trading using opposite Sports Gear and Chi Hua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sports Gear position performs unexpectedly, Chi Hua 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 Chi Hua will offset losses from the drop in Chi Hua's long position.| Sports Gear vs. Giant Manufacturing Co | Sports Gear vs. Johnson Health Tech | Sports Gear vs. Power Wind Health |
| Chi Hua vs. Giant Manufacturing Co | Chi Hua vs. Johnson Health Tech | Chi Hua vs. Sports Gear Co | Chi Hua vs. Power Wind Health |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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