Correlation Between CHC Resources and China Ecotek
Can any of the company-specific risk be diversified away by investing in both CHC Resources and China Ecotek 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 CHC Resources and China Ecotek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHC Resources Corp and China Ecotek Corp, you can compare the effects of market volatilities on CHC Resources and China Ecotek 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 CHC Resources with a short position of China Ecotek. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHC Resources and China Ecotek.
Diversification Opportunities for CHC Resources and China Ecotek
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHC and China is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CHC Resources Corp and China Ecotek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Ecotek Corp and CHC Resources 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 CHC Resources Corp are associated (or correlated) with China Ecotek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Ecotek Corp has no effect on the direction of CHC Resources i.e., CHC Resources and China Ecotek go up and down completely randomly.
Pair Corralation between CHC Resources and China Ecotek
Assuming the 90 days trading horizon CHC Resources Corp is expected to generate 1.13 times more return on investment than China Ecotek. However, CHC Resources is 1.13 times more volatile than China Ecotek Corp. It trades about 0.09 of its potential returns per unit of risk. China Ecotek Corp is currently generating about 0.09 per unit of risk. If you would invest 6,380 in CHC Resources Corp on September 12, 2024 and sell it today you would earn a total of 360.00 from holding CHC Resources Corp or generate 5.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHC Resources Corp vs. China Ecotek Corp
Performance |
| Timeline |
| CHC Resources Corp |
| China Ecotek Corp |
CHC Resources and China Ecotek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHC Resources and China Ecotek
The main advantage of trading using opposite CHC Resources and China Ecotek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHC Resources position performs unexpectedly, China Ecotek 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 Ecotek will offset losses from the drop in China Ecotek's long position.| CHC Resources vs. China Steel Chemical | CHC Resources vs. Taiwan Secom Co | CHC Resources vs. Nak Sealing Technologies | CHC Resources vs. Sinyi Realty |
| China Ecotek vs. CHC Resources Corp | China Ecotek vs. China Steel Chemical | China Ecotek vs. TTET Union Corp | China Ecotek vs. Standard Foods 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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