Correlation Between Choice Development and China Television
Can any of the company-specific risk be diversified away by investing in both Choice Development and China Television 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 Choice Development and China Television into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Choice Development and China Television Co, you can compare the effects of market volatilities on Choice Development and China Television 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 Choice Development with a short position of China Television. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Development and China Television.
Diversification Opportunities for Choice Development and China Television
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Choice and China is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Choice Development and China Television Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Television and Choice Development 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 Choice Development are associated (or correlated) with China Television. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Television has no effect on the direction of Choice Development i.e., Choice Development and China Television go up and down completely randomly.
Pair Corralation between Choice Development and China Television
Assuming the 90 days trading horizon Choice Development is expected to generate 1.34 times more return on investment than China Television. However, Choice Development is 1.34 times more volatile than China Television Co. It trades about 0.04 of its potential returns per unit of risk. China Television Co is currently generating about -0.23 per unit of risk. If you would invest 1,575 in Choice Development on August 29, 2024 and sell it today you would earn a total of 25.00 from holding Choice Development or generate 1.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Development vs. China Television Co
Performance |
| Timeline |
| Choice Development |
| China Television |
Choice Development and China Television Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Development and China Television
The main advantage of trading using opposite Choice Development and China Television positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Development position performs unexpectedly, China Television 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 Television will offset losses from the drop in China Television's long position.| Choice Development vs. China Television Co | Choice Development vs. KNH Enterprise Co | Choice Development vs. Ton Yi Industrial | Choice Development vs. Taiwan Sakura Corp |
| China Television vs. Chunghwa Telecom Co | China Television vs. CTBC Financial Holding | China Television vs. Fubon Financial Holding | China Television vs. President Chain Store |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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