Correlation Between China Times and Leatec Fine
Can any of the company-specific risk be diversified away by investing in both China Times and Leatec Fine 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 Leatec Fine 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 Leatec Fine Ceramics, you can compare the effects of market volatilities on China Times and Leatec Fine 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 Leatec Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Times and Leatec Fine.
Diversification Opportunities for China Times and Leatec Fine
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Leatec is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding China Times Publishing and Leatec Fine Ceramics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leatec Fine Ceramics 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 Leatec Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leatec Fine Ceramics has no effect on the direction of China Times i.e., China Times and Leatec Fine go up and down completely randomly.
Pair Corralation between China Times and Leatec Fine
Assuming the 90 days trading horizon China Times Publishing is expected to under-perform the Leatec Fine. But the stock apears to be less risky and, when comparing its historical volatility, China Times Publishing is 1.18 times less risky than Leatec Fine. The stock trades about 0.0 of its potential returns per unit of risk. The Leatec Fine Ceramics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,705 in Leatec Fine Ceramics on November 9, 2024 and sell it today you would earn a total of 5.00 from holding Leatec Fine Ceramics or generate 0.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Times Publishing vs. Leatec Fine Ceramics
Performance |
| Timeline |
| China Times Publishing |
Risk-Adjusted Performance
Insignificant
Weak | Strong |
| Leatec Fine Ceramics |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
China Times and Leatec Fine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Times and Leatec Fine
The main advantage of trading using opposite China Times and Leatec Fine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Times position performs unexpectedly, Leatec Fine 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 Leatec Fine will offset losses from the drop in Leatec Fine's long position.The idea behind China Times Publishing and Leatec Fine Ceramics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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