Correlation Between Pou Chen and President Chain
Can any of the company-specific risk be diversified away by investing in both Pou Chen and President Chain 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 Pou Chen and President Chain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pou Chen Corp and President Chain Store, you can compare the effects of market volatilities on Pou Chen and President Chain 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 Pou Chen with a short position of President Chain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pou Chen and President Chain.
Diversification Opportunities for Pou Chen and President Chain
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pou and President is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pou Chen Corp and President Chain Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Chain Store and Pou Chen 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 Pou Chen Corp are associated (or correlated) with President Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Chain Store has no effect on the direction of Pou Chen i.e., Pou Chen and President Chain go up and down completely randomly.
Pair Corralation between Pou Chen and President Chain
Assuming the 90 days trading horizon Pou Chen Corp is expected to generate 1.2 times more return on investment than President Chain. However, Pou Chen is 1.2 times more volatile than President Chain Store. It trades about 0.21 of its potential returns per unit of risk. President Chain Store is currently generating about -0.21 per unit of risk. If you would invest 3,830 in Pou Chen Corp on August 29, 2024 and sell it today you would earn a total of 340.00 from holding Pou Chen Corp or generate 8.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pou Chen Corp vs. President Chain Store
Performance |
| Timeline |
| Pou Chen Corp |
| President Chain Store |
Pou Chen and President Chain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pou Chen and President Chain
The main advantage of trading using opposite Pou Chen and President Chain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pou Chen position performs unexpectedly, President Chain 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 President Chain will offset losses from the drop in President Chain's long position.| Pou Chen vs. Uni President Enterprises Corp | Pou Chen vs. Cheng Shin Rubber | Pou Chen vs. Far Eastern New | Pou Chen vs. Formosa Chemicals Fibre |
| President Chain vs. Taiwan Cement Corp | President Chain vs. Ruentex Development Co | President Chain vs. Symtek Automation Asia | President Chain vs. CTCI Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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