Correlation Between Hwa Fong and CKM Building

Can any of the company-specific risk be diversified away by investing in both Hwa Fong and CKM Building 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 Hwa Fong and CKM Building into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hwa Fong Rubber and CKM Building Material, you can compare the effects of market volatilities on Hwa Fong and CKM Building 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 Hwa Fong with a short position of CKM Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwa Fong and CKM Building.

Diversification Opportunities for Hwa Fong and CKM Building

0.81

Correlation Coefficient

Hwa Fong  CKM Building

Very poor diversification

The 3 months correlation between Hwa and CKM is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hwa Fong Rubber and CKM Building Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKM Building Material and Hwa Fong 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 Hwa Fong Rubber are associated (or correlated) with CKM Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKM Building Material has no effect on the direction of Hwa Fong i.e., Hwa Fong and CKM Building go up and down completely randomly.

Pair Corralation between Hwa Fong and CKM Building

Assuming the 90 days trading horizon Hwa Fong is expected to generate 2.63 times less return on investment than CKM Building. But when comparing it to its historical volatility, Hwa Fong Rubber is 1.86 times less risky than CKM Building. It trades about 0.19 of its potential returns per unit of risk. CKM Building Material is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  3,475  in CKM Building Material on December 21, 2024 and sell it today you would earn a total of  695.00  from holding CKM Building Material or generate 20.0% return on investment over 90 days.

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

Hwa Fong Rubber  vs.  CKM Building Material

Hwa Fong Rubber

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hwa Fong Rubber are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hwa Fong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CKM Building Material

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CKM Building Material are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CKM Building showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hwa Fong and CKM Building

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

The idea behind Hwa Fong Rubber and CKM Building Material 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.