Correlation Between Falcon Power and Chia Chang

Can any of the company-specific risk be diversified away by investing in both Falcon Power and Chia Chang 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 Falcon Power and Chia Chang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Falcon Power Co and Chia Chang Co, you can compare the effects of market volatilities on Falcon Power and Chia Chang 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 Falcon Power with a short position of Chia Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Power and Chia Chang.

Diversification Opportunities for Falcon Power and Chia Chang

0.84

Correlation Coefficient

Falcon Power  Chia Chang

Very poor diversification

The 3 months correlation between Falcon and Chia is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Power Co and Chia Chang Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Chang and Falcon Power 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 Falcon Power Co are associated (or correlated) with Chia Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Chang has no effect on the direction of Falcon Power i.e., Falcon Power and Chia Chang go up and down completely randomly.

Pair Corralation between Falcon Power and Chia Chang

Assuming the 90 days trading horizon Falcon Power Co is expected to under-perform the Chia Chang. In addition to that, Falcon Power is 1.98 times more volatile than Chia Chang Co. It trades about -0.01 of its total potential returns per unit of risk. Chia Chang Co is currently generating about 0.04 per unit of volatility. If you would invest  3,427  in Chia Chang Co on October 22, 2024 and sell it today you would earn a total of  593.00  from holding Chia Chang Co or generate 17.3% return on investment over 90 days.

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

Falcon Power Co  vs.  Chia Chang Co

Falcon Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Power Co 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Chia Chang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chia Chang Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Falcon Power and Chia Chang

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

The idea behind Falcon Power Co and Chia Chang Co 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.