Correlation Between China Times and Cheng Mei
Can any of the company-specific risk be diversified away by investing in both China Times 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 China Times and Cheng Mei into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Times Publishing and Cheng Mei Materials, you can compare the effects of market volatilities on China Times 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 China Times with a short position of Cheng Mei. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Times and Cheng Mei.
Diversification Opportunities for China Times and Cheng Mei
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Cheng is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Times Publishing 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 China Times 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 China Times Publishing 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 China Times i.e., China Times and Cheng Mei go up and down completely randomly.
Pair Corralation between China Times and Cheng Mei
Assuming the 90 days trading horizon China Times is expected to generate 1.18 times less return on investment than Cheng Mei. In addition to that, China Times is 1.65 times more volatile than Cheng Mei Materials. It trades about 0.01 of its total potential returns per unit of risk. Cheng Mei Materials is currently generating about 0.03 per unit of volatility. If you would invest 1,140 in Cheng Mei Materials on October 30, 2024 and sell it today you would earn a total of 245.00 from holding Cheng Mei Materials or generate 21.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Times Publishing vs. Cheng Mei Materials
Performance |
| Timeline |
| China Times Publishing |
| Cheng Mei Materials |
China Times and Cheng Mei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Times and Cheng Mei
The main advantage of trading using opposite China Times and Cheng Mei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Times 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.| China Times vs. Simplo Technology Co | China Times vs. Golden Biotechnology | China Times vs. Union Insurance Co | China Times vs. ADLINK Technology |
| 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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