Correlation Between Chuangs China and X FAB
Can any of the company-specific risk be diversified away by investing in both Chuangs China and X FAB 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 X FAB 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 X FAB Silicon Foundries, you can compare the effects of market volatilities on Chuangs China and X FAB 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 X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chuangs China and X FAB.
Diversification Opportunities for Chuangs China and X FAB
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Chuangs and XFB is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Chuangs China i.e., Chuangs China and X FAB go up and down completely randomly.
Pair Corralation between Chuangs China and X FAB
Assuming the 90 days horizon Chuangs China Investments is expected to generate 0.21 times more return on investment than X FAB. However, Chuangs China Investments is 4.86 times less risky than X FAB. It trades about 0.0 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.04 per unit of risk. If you would invest 1.00 in Chuangs China Investments on September 26, 2024 and sell it today you would earn a total of 0.00 from holding Chuangs China Investments or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chuangs China Investments vs. X FAB Silicon Foundries
Performance |
| Timeline |
| Chuangs China Investments |
| X FAB Silicon |
Chuangs China and X FAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chuangs China and X FAB
The main advantage of trading using opposite Chuangs China and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chuangs China position performs unexpectedly, X FAB 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 X FAB will offset losses from the drop in X FAB's long position.| Chuangs China vs. Sun Hung Kai | Chuangs China vs. China Overseas Land | Chuangs China vs. Mitsubishi Estate Co | Chuangs China vs. Daiwa House Industry |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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