Correlation Between Falcon Power and Chien Kuo

Can any of the company-specific risk be diversified away by investing in both Falcon Power and Chien Kuo 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 Chien Kuo 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 Chien Kuo Construction, you can compare the effects of market volatilities on Falcon Power and Chien Kuo 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 Chien Kuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falcon Power and Chien Kuo.

Diversification Opportunities for Falcon Power and Chien Kuo

-0.55

Correlation Coefficient

Falcon Power  Chien Kuo

Excellent diversification

The 3 months correlation between Falcon and Chien is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Power Co and Chien Kuo Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chien Kuo Construction 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 Chien Kuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chien Kuo Construction has no effect on the direction of Falcon Power i.e., Falcon Power and Chien Kuo go up and down completely randomly.

Pair Corralation between Falcon Power and Chien Kuo

Assuming the 90 days trading horizon Falcon Power Co is expected to under-perform the Chien Kuo. But the stock apears to be less risky and, when comparing its historical volatility, Falcon Power Co is 1.5 times less risky than Chien Kuo. The stock trades about -0.14 of its potential returns per unit of risk. The Chien Kuo Construction is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,265  in Chien Kuo Construction on October 20, 2024 and sell it today you would earn a total of  500.00  from holding Chien Kuo Construction or generate 22.08% return on investment over 90 days.

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

Falcon Power Co  vs.  Chien Kuo Construction

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.

Chien Kuo Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chien Kuo Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chien Kuo showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Falcon Power and Chien Kuo

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

The idea behind Falcon Power Co and Chien Kuo 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.