Correlation Between Chung Fu and Chong Hong

Can any of the company-specific risk be diversified away by investing in both Chung Fu and Chong Hong 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 Chung Fu and Chong Hong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chung Fu Tex International and Chong Hong Construction, you can compare the effects of market volatilities on Chung Fu and Chong Hong 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 Chung Fu with a short position of Chong Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Fu and Chong Hong.

Diversification Opportunities for Chung Fu and Chong Hong

0.52

Correlation Coefficient

Chung Fu  Chong Hong

Very weak diversification

The 3 months correlation between Chung and Chong is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Chung Fu Tex International and Chong Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chong Hong Construction and Chung Fu 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 Chung Fu Tex International are associated (or correlated) with Chong Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chong Hong Construction has no effect on the direction of Chung Fu i.e., Chung Fu and Chong Hong go up and down completely randomly.

Pair Corralation between Chung Fu and Chong Hong

Assuming the 90 days trading horizon Chung Fu Tex International is expected to generate 1.17 times more return on investment than Chong Hong. However, Chung Fu is 1.17 times more volatile than Chong Hong Construction. It trades about -0.03 of its potential returns per unit of risk. Chong Hong Construction is currently generating about -0.13 per unit of risk. If you would invest  4,430  in Chung Fu Tex International on September 15, 2024 and sell it today you would lose (330.00) from holding Chung Fu Tex International or give up 7.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Chung Fu Tex International  vs.  Chong Hong Construction

Chung Fu Tex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Fu Tex International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Fu is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chong Hong Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chong Hong Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Chung Fu and Chong Hong

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

The idea behind Chung Fu Tex International and Chong Hong Construction 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.