Correlation Between Chi Hua and XAC Automation

Can any of the company-specific risk be diversified away by investing in both Chi Hua and XAC Automation 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 Chi Hua and XAC Automation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chi Hua Fitness and XAC Automation, you can compare the effects of market volatilities on Chi Hua and XAC Automation 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 Chi Hua with a short position of XAC Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chi Hua and XAC Automation.

Diversification Opportunities for Chi Hua and XAC Automation

0.58

Correlation Coefficient

Chi Hua  XAC Automation

Very weak diversification

The 3 months correlation between Chi and XAC is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Chi Hua Fitness and XAC Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAC Automation and Chi Hua 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 Chi Hua Fitness are associated (or correlated) with XAC Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAC Automation has no effect on the direction of Chi Hua i.e., Chi Hua and XAC Automation go up and down completely randomly.

Pair Corralation between Chi Hua and XAC Automation

Assuming the 90 days trading horizon Chi Hua Fitness is expected to generate 0.35 times more return on investment than XAC Automation. However, Chi Hua Fitness is 2.87 times less risky than XAC Automation. It trades about 0.09 of its potential returns per unit of risk. XAC Automation is currently generating about 0.03 per unit of risk. If you would invest  3,650  in Chi Hua Fitness on December 21, 2024 and sell it today you would earn a total of  155.00  from holding Chi Hua Fitness or generate 4.25% return on investment over 90 days.

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

Chi Hua Fitness  vs.  XAC Automation

Chi Hua Fitness

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chi Hua Fitness are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chi Hua is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

XAC Automation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XAC Automation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, XAC Automation 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 Chi Hua and XAC Automation

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

The idea behind Chi Hua Fitness and XAC Automation 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.