Correlation Between China Times and Sunfon Construction
Can any of the company-specific risk be diversified away by investing in both China Times and Sunfon Construction 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 Sunfon Construction 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 Sunfon Construction Co, you can compare the effects of market volatilities on China Times and Sunfon Construction 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 Sunfon Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Times and Sunfon Construction.
Diversification Opportunities for China Times and Sunfon Construction
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Sunfon is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding China Times Publishing and Sunfon Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunfon Construction 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 Sunfon Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunfon Construction has no effect on the direction of China Times i.e., China Times and Sunfon Construction go up and down completely randomly.
Pair Corralation between China Times and Sunfon Construction
Assuming the 90 days trading horizon China Times is expected to generate 2.64 times less return on investment than Sunfon Construction. In addition to that, China Times is 2.89 times more volatile than Sunfon Construction Co. It trades about 0.01 of its total potential returns per unit of risk. Sunfon Construction Co is currently generating about 0.05 per unit of volatility. If you would invest 1,955 in Sunfon Construction Co on November 29, 2024 and sell it today you would earn a total of 15.00 from holding Sunfon Construction Co or generate 0.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Times Publishing vs. Sunfon Construction Co
Performance |
| Timeline |
| China Times Publishing |
| Sunfon Construction |
China Times and Sunfon Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Times and Sunfon Construction
The main advantage of trading using opposite China Times and Sunfon Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Times position performs unexpectedly, Sunfon Construction 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 Sunfon Construction will offset losses from the drop in Sunfon Construction's long position.| China Times vs. Formosa Chemicals Fibre | China Times vs. Chi Sheng Chemical | China Times vs. Formosan Union Chemical | China Times vs. Taiwan Speciality Chemicals |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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