Correlation Between China Metal and Cheng Fwa
Can any of the company-specific risk be diversified away by investing in both China Metal and Cheng Fwa 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 China Metal and Cheng Fwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Metal Products and Cheng Fwa Industrial, you can compare the effects of market volatilities on China Metal and Cheng Fwa 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 China Metal with a short position of Cheng Fwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Metal and Cheng Fwa.
Diversification Opportunities for China Metal and Cheng Fwa
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Cheng is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding China Metal Products and Cheng Fwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Fwa Industrial and China Metal 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 China Metal Products are associated (or correlated) with Cheng Fwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Fwa Industrial has no effect on the direction of China Metal i.e., China Metal and Cheng Fwa go up and down completely randomly.
Pair Corralation between China Metal and Cheng Fwa
Assuming the 90 days trading horizon China Metal Products is expected to under-perform the Cheng Fwa. But the stock apears to be less risky and, when comparing its historical volatility, China Metal Products is 2.05 times less risky than Cheng Fwa. The stock trades about -0.16 of its potential returns per unit of risk. The Cheng Fwa Industrial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,710 in Cheng Fwa Industrial on September 15, 2024 and sell it today you would earn a total of 520.00 from holding Cheng Fwa Industrial or generate 19.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
China Metal Products vs. Cheng Fwa Industrial
Performance |
Timeline |
China Metal Products |
Cheng Fwa Industrial |
China Metal and Cheng Fwa Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Metal and Cheng Fwa
The main advantage of trading using opposite China Metal and Cheng Fwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Metal position performs unexpectedly, Cheng Fwa 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 Cheng Fwa will offset losses from the drop in Cheng Fwa's long position.China Metal vs. Basso Industry Corp | China Metal vs. Chung Hsin Electric Machinery | China Metal vs. TYC Brother Industrial | China Metal vs. TECO Electric Machinery |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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