Correlation Between Chuangs China and Highlight Communications
Can any of the company-specific risk be diversified away by investing in both Chuangs China and Highlight Communications 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 Chuangs China and Highlight Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chuangs China Investments and Highlight Communications AG, you can compare the effects of market volatilities on Chuangs China and Highlight Communications 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 Chuangs China with a short position of Highlight Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chuangs China and Highlight Communications.
Diversification Opportunities for Chuangs China and Highlight Communications
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Chuangs and Highlight is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications and Chuangs China 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 Chuangs China Investments are associated (or correlated) with Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of Chuangs China i.e., Chuangs China and Highlight Communications go up and down completely randomly.
Pair Corralation between Chuangs China and Highlight Communications
Assuming the 90 days horizon Chuangs China Investments is expected to generate 2.19 times more return on investment than Highlight Communications. However, Chuangs China is 2.19 times more volatile than Highlight Communications AG. It trades about -0.02 of its potential returns per unit of risk. Highlight Communications AG is currently generating about -0.08 per unit of risk. If you would invest 3.05 in Chuangs China Investments on September 14, 2024 and sell it today you would lose (2.05) from holding Chuangs China Investments or give up 67.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chuangs China Investments vs. Highlight Communications AG
Performance |
| Timeline |
| Chuangs China Investments |
| Highlight Communications |
Chuangs China and Highlight Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chuangs China and Highlight Communications
The main advantage of trading using opposite Chuangs China and Highlight Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chuangs China position performs unexpectedly, Highlight Communications 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 Highlight Communications will offset losses from the drop in Highlight Communications' long position.| Chuangs China vs. Superior Plus Corp | Chuangs China vs. SIVERS SEMICONDUCTORS AB | Chuangs China vs. Reliance Steel Aluminum | Chuangs China vs. CHINA HUARONG ENERHD 50 |
| Highlight Communications vs. The Walt Disney | Highlight Communications vs. Charter Communications | Highlight Communications vs. Warner Music Group | Highlight Communications vs. Superior Plus 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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