Correlation Between China Ecotek and Chen Full

Can any of the company-specific risk be diversified away by investing in both China Ecotek and Chen Full 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 Ecotek and Chen Full into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Ecotek Corp and Chen Full International, you can compare the effects of market volatilities on China Ecotek and Chen Full 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 Ecotek with a short position of Chen Full. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Ecotek and Chen Full.

Diversification Opportunities for China Ecotek and Chen Full

0.19

Correlation Coefficient

China Ecotek  Chen Full

Average diversification

The 3 months correlation between China and Chen is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding China Ecotek Corp and Chen Full International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chen Full International and China Ecotek 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 Ecotek Corp are associated (or correlated) with Chen Full. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chen Full International has no effect on the direction of China Ecotek i.e., China Ecotek and Chen Full go up and down completely randomly.

Pair Corralation between China Ecotek and Chen Full

Assuming the 90 days trading horizon China Ecotek Corp is expected to generate 1.2 times more return on investment than Chen Full. However, China Ecotek is 1.2 times more volatile than Chen Full International. It trades about 0.05 of its potential returns per unit of risk. Chen Full International is currently generating about 0.04 per unit of risk. If you would invest  4,335  in China Ecotek Corp on September 16, 2024 and sell it today you would earn a total of  1,855  from holding China Ecotek Corp or generate 42.79% return on investment over 90 days.

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

China Ecotek Corp  vs.  Chen Full International

China Ecotek Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Ecotek Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, China Ecotek is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chen Full International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Ecotek and Chen Full

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

The idea behind China Ecotek Corp and Chen Full International 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.