Correlation Between Elite Material and Chi Hua
Can any of the company-specific risk be diversified away by investing in both Elite Material and Chi Hua 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 Elite Material and Chi Hua into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elite Material Co and Chi Hua Fitness, you can compare the effects of market volatilities on Elite Material and Chi Hua 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 Elite Material with a short position of Chi Hua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Material and Chi Hua.
Diversification Opportunities for Elite Material and Chi Hua
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Elite and Chi is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Elite Material Co and Chi Hua Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Hua Fitness and Elite Material 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 Elite Material Co are associated (or correlated) with Chi Hua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Hua Fitness has no effect on the direction of Elite Material i.e., Elite Material and Chi Hua go up and down completely randomly.
Pair Corralation between Elite Material and Chi Hua
Assuming the 90 days trading horizon Elite Material is expected to generate 1.59 times less return on investment than Chi Hua. But when comparing it to its historical volatility, Elite Material Co is 5.51 times less risky than Chi Hua. It trades about 0.1 of its potential returns per unit of risk. Chi Hua Fitness is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,999 in Chi Hua Fitness on September 26, 2024 and sell it today you would lose (2,349) from holding Chi Hua Fitness or give up 39.16% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Elite Material Co vs. Chi Hua Fitness
Performance |
Timeline |
Elite Material |
Chi Hua Fitness |
Elite Material and Chi Hua Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Elite Material and Chi Hua
The main advantage of trading using opposite Elite Material and Chi Hua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Material position performs unexpectedly, Chi Hua 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 Chi Hua will offset losses from the drop in Chi Hua's long position.Elite Material vs. Century Wind Power | Elite Material vs. Green World Fintech | Elite Material vs. Ingentec | Elite Material vs. Chaheng Precision Co |
Chi Hua vs. Daxin Materials Corp | Chi Hua vs. Hwa Fong Rubber | Chi Hua vs. Chung Lien Transportation | Chi Hua vs. Elite Material Co |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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