Correlation Between ChengDu Hi and Fiberhome Telecommunicatio

Can any of the company-specific risk be diversified away by investing in both ChengDu Hi and Fiberhome Telecommunicatio 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 ChengDu Hi and Fiberhome Telecommunicatio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ChengDu Hi Tech Development and Fiberhome Telecommunication Technologies, you can compare the effects of market volatilities on ChengDu Hi and Fiberhome Telecommunicatio 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 ChengDu Hi with a short position of Fiberhome Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChengDu Hi and Fiberhome Telecommunicatio.

Diversification Opportunities for ChengDu Hi and Fiberhome Telecommunicatio

0.27

Correlation Coefficient

ChengDu Hi  Fiberhome Telecommunicatio

Modest diversification

The 3 months correlation between ChengDu and Fiberhome is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ChengDu Hi Tech Development and Fiberhome Telecommunication Te in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiberhome Telecommunicatio and ChengDu Hi 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 ChengDu Hi Tech Development are associated (or correlated) with Fiberhome Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiberhome Telecommunicatio has no effect on the direction of ChengDu Hi i.e., ChengDu Hi and Fiberhome Telecommunicatio go up and down completely randomly.

Pair Corralation between ChengDu Hi and Fiberhome Telecommunicatio

Assuming the 90 days trading horizon ChengDu Hi Tech Development is expected to under-perform the Fiberhome Telecommunicatio. In addition to that, ChengDu Hi is 1.02 times more volatile than Fiberhome Telecommunication Technologies. It trades about -0.17 of its total potential returns per unit of risk. Fiberhome Telecommunication Technologies is currently generating about 0.03 per unit of volatility. If you would invest  1,902  in Fiberhome Telecommunication Technologies on October 22, 2024 and sell it today you would earn a total of  18.00  from holding Fiberhome Telecommunication Technologies or generate 0.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

ChengDu Hi Tech Development  vs.  Fiberhome Telecommunication Te

ChengDu Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChengDu Hi Tech Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Fiberhome Telecommunicatio

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberhome Telecommunication Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fiberhome Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChengDu Hi and Fiberhome Telecommunicatio

The main advantage of trading using opposite ChengDu Hi and Fiberhome Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChengDu Hi position performs unexpectedly, Fiberhome Telecommunicatio 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 Fiberhome Telecommunicatio will offset losses from the drop in Fiberhome Telecommunicatio's long position.

The idea behind ChengDu Hi Tech Development and Fiberhome Telecommunication Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.