Correlation Between Collins Foods and CHINA HUARONG
Can any of the company-specific risk be diversified away by investing in both Collins Foods and CHINA HUARONG 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 Collins Foods and CHINA HUARONG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Collins Foods Limited and CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on Collins Foods and CHINA HUARONG 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 Collins Foods with a short position of CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collins Foods and CHINA HUARONG.
Diversification Opportunities for Collins Foods and CHINA HUARONG
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Collins and CHINA is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods Limited and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD and Collins Foods 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 Collins Foods Limited are associated (or correlated) with CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of Collins Foods i.e., Collins Foods and CHINA HUARONG go up and down completely randomly.
Pair Corralation between Collins Foods and CHINA HUARONG
Assuming the 90 days horizon Collins Foods is expected to generate 111.62 times less return on investment than CHINA HUARONG. But when comparing it to its historical volatility, Collins Foods Limited is 18.77 times less risky than CHINA HUARONG. It trades about 0.02 of its potential returns per unit of risk. CHINA HUARONG ENERHD 50 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 0.50 in CHINA HUARONG ENERHD 50 on September 20, 2024 and sell it today you would lose (0.35) from holding CHINA HUARONG ENERHD 50 or give up 70.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Collins Foods Limited vs. CHINA HUARONG ENERHD 50
Performance |
| Timeline |
| Collins Foods Limited |
| CHINA HUARONG ENERHD |
Collins Foods and CHINA HUARONG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Collins Foods and CHINA HUARONG
The main advantage of trading using opposite Collins Foods and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collins Foods position performs unexpectedly, CHINA HUARONG 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 HUARONG will offset losses from the drop in CHINA HUARONG's long position.| Collins Foods vs. Starbucks | Collins Foods vs. Superior Plus Corp | Collins Foods vs. SIVERS SEMICONDUCTORS AB | Collins Foods vs. NorAm Drilling AS |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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