Correlation Between Sports Gear and Cheng Mei
Can any of the company-specific risk be diversified away by investing in both Sports Gear and Cheng Mei 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 Cheng Mei 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 Cheng Mei Materials, you can compare the effects of market volatilities on Sports Gear and Cheng Mei 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 Cheng Mei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sports Gear and Cheng Mei.
Diversification Opportunities for Sports Gear and Cheng Mei
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sports and Cheng is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sports Gear Co and Cheng Mei Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Mei Materials 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 Cheng Mei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Mei Materials has no effect on the direction of Sports Gear i.e., Sports Gear and Cheng Mei go up and down completely randomly.
Pair Corralation between Sports Gear and Cheng Mei
Assuming the 90 days trading horizon Sports Gear Co is expected to generate 0.89 times more return on investment than Cheng Mei. However, Sports Gear Co is 1.13 times less risky than Cheng Mei. It trades about 0.09 of its potential returns per unit of risk. Cheng Mei Materials is currently generating about 0.03 per unit of risk. If you would invest 6,563 in Sports Gear Co on October 30, 2024 and sell it today you would earn a total of 7,037 from holding Sports Gear Co or generate 107.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sports Gear Co vs. Cheng Mei Materials
Performance |
| Timeline |
| Sports Gear |
| Cheng Mei Materials |
Sports Gear and Cheng Mei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sports Gear and Cheng Mei
The main advantage of trading using opposite Sports Gear and Cheng Mei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sports Gear position performs unexpectedly, Cheng Mei 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 Cheng Mei will offset losses from the drop in Cheng Mei's long position.| Sports Gear vs. Feng Tay Enterprises | Sports Gear vs. Pou Chen Corp | Sports Gear vs. Fulgent Sun International | Sports Gear vs. Taiwan Paiho |
| Cheng Mei vs. HIM International Music | Cheng Mei vs. Oceanic Beverages Co | Cheng Mei vs. Loop Telecommunication International | Cheng Mei vs. C Media Electronics |
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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