Correlation Between Ruentex Development and Fuh Hwa
Can any of the company-specific risk be diversified away by investing in both Ruentex Development and Fuh Hwa 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 Ruentex Development and Fuh Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ruentex Development Co and Fuh Hwa Daily, you can compare the effects of market volatilities on Ruentex Development and Fuh Hwa 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 Ruentex Development with a short position of Fuh Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruentex Development and Fuh Hwa.
Diversification Opportunities for Ruentex Development and Fuh Hwa
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ruentex and Fuh is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and Fuh Hwa Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuh Hwa Daily and Ruentex 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 Ruentex Development Co are associated (or correlated) with Fuh Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuh Hwa Daily has no effect on the direction of Ruentex Development i.e., Ruentex Development and Fuh Hwa go up and down completely randomly.
Pair Corralation between Ruentex Development and Fuh Hwa
Assuming the 90 days trading horizon Ruentex Development Co is expected to generate 0.47 times more return on investment than Fuh Hwa. However, Ruentex Development Co is 2.15 times less risky than Fuh Hwa. It trades about -0.14 of its potential returns per unit of risk. Fuh Hwa Daily is currently generating about -0.14 per unit of risk. If you would invest 4,700 in Ruentex Development Co on September 4, 2024 and sell it today you would lose (160.00) from holding Ruentex Development Co or give up 3.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ruentex Development Co vs. Fuh Hwa Daily
Performance |
| Timeline |
| Ruentex Development |
| Fuh Hwa Daily |
Ruentex Development and Fuh Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ruentex Development and Fuh Hwa
The main advantage of trading using opposite Ruentex Development and Fuh Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ruentex Development position performs unexpectedly, Fuh Hwa 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 Fuh Hwa will offset losses from the drop in Fuh Hwa's long position.| Ruentex Development vs. Ruentex Industries | Ruentex Development vs. Pou Chen Corp | Ruentex Development vs. Fubon Financial Holding | Ruentex Development vs. Cathay Financial Holding |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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