Correlation Between Chi Hua and C Media

Can any of the company-specific risk be diversified away by investing in both Chi Hua and C Media 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 C Media 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 C Media Electronics, you can compare the effects of market volatilities on Chi Hua and C Media 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 C Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chi Hua and C Media.

Diversification Opportunities for Chi Hua and C Media

0.44

Correlation Coefficient

Chi Hua  C Media

Very weak diversification

The 3 months correlation between Chi and 6237 is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Chi Hua Fitness and C Media Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C Media Electronics 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 C Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C Media Electronics has no effect on the direction of Chi Hua i.e., Chi Hua and C Media go up and down completely randomly.

Pair Corralation between Chi Hua and C Media

Assuming the 90 days trading horizon Chi Hua Fitness is expected to generate 5.83 times more return on investment than C Media. However, Chi Hua is 5.83 times more volatile than C Media Electronics. It trades about 0.03 of its potential returns per unit of risk. C Media Electronics is currently generating about 0.02 per unit of risk. If you would invest  5,981  in Chi Hua Fitness on September 24, 2024 and sell it today you would lose (2,346) from holding Chi Hua Fitness or give up 39.22% of portfolio value over 90 days.

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

Chi Hua Fitness  vs.  C Media Electronics

Chi Hua Fitness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chi Hua Fitness 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.

C Media Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in C Media Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, C Media 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 C Media

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

The idea behind Chi Hua Fitness and C Media Electronics 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.