Correlation Between Chi Hua and Ching Feng

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

Diversification Opportunities for Chi Hua and Ching Feng

-0.01

Correlation Coefficient

Chi Hua  Ching Feng

Good diversification

The 3 months correlation between Chi and Ching is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Chi Hua Fitness and Ching Feng Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ching Feng Home 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 Ching Feng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ching Feng Home has no effect on the direction of Chi Hua i.e., Chi Hua and Ching Feng go up and down completely randomly.

Pair Corralation between Chi Hua and Ching Feng

Assuming the 90 days trading horizon Chi Hua Fitness is expected to generate 8.04 times more return on investment than Ching Feng. However, Chi Hua is 8.04 times more volatile than Ching Feng Home. It trades about 0.03 of its potential returns per unit of risk. Ching Feng Home is currently generating about 0.07 per unit of risk. If you would invest  6,822  in Chi Hua Fitness on December 4, 2024 and sell it today you would lose (3,152) from holding Chi Hua Fitness or give up 46.2% of portfolio value over 90 days.

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

Chi Hua Fitness  vs.  Ching Feng Home

Chi Hua Fitness

Risk-Adjusted Performance

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 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.

Ching Feng Home

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ching Feng Home are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Ching Feng 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 Ching Feng

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

The idea behind Chi Hua Fitness and Ching Feng Home 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.