Correlation Between Chi Hua and DV Biomed

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

Diversification Opportunities for Chi Hua and DV Biomed

0.72

Correlation Coefficient

Chi Hua  DV Biomed

Poor diversification

The 3 months correlation between Chi and 6539 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chi Hua Fitness and DV Biomed Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DV Biomed 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 DV Biomed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DV Biomed has no effect on the direction of Chi Hua i.e., Chi Hua and DV Biomed go up and down completely randomly.

Pair Corralation between Chi Hua and DV Biomed

Assuming the 90 days trading horizon Chi Hua Fitness is expected to generate 0.39 times more return on investment than DV Biomed. However, Chi Hua Fitness is 2.58 times less risky than DV Biomed. It trades about 0.08 of its potential returns per unit of risk. DV Biomed Co is currently generating about 0.02 per unit of risk. If you would invest  3,700  in Chi Hua Fitness on December 27, 2024 and sell it today you would earn a total of  130.00  from holding Chi Hua Fitness or generate 3.51% return on investment over 90 days.

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

Chi Hua Fitness  vs.  DV Biomed Co

Chi Hua Fitness

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chi Hua Fitness are ranked lower than 6 (%) 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.

DV Biomed

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Chi Hua Fitness and DV Biomed Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.