Correlation Between Pacific Construction and China Times

Can any of the company-specific risk be diversified away by investing in both Pacific Construction and China Times 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 Pacific Construction and China Times into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pacific Construction Co and China Times Publishing, you can compare the effects of market volatilities on Pacific Construction and China Times 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 Pacific Construction with a short position of China Times. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Construction and China Times.

Diversification Opportunities for Pacific Construction and China Times

-0.4

Correlation Coefficient

Pacific Construction  China Times

Very good diversification

The 3 months correlation between Pacific and China is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Construction Co and China Times Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Times Publishing and Pacific Construction 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 Pacific Construction Co are associated (or correlated) with China Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Times Publishing has no effect on the direction of Pacific Construction i.e., Pacific Construction and China Times go up and down completely randomly.

Pair Corralation between Pacific Construction and China Times

Assuming the 90 days trading horizon Pacific Construction Co is expected to generate 0.54 times more return on investment than China Times. However, Pacific Construction Co is 1.86 times less risky than China Times. It trades about 0.03 of its potential returns per unit of risk. China Times Publishing is currently generating about 0.02 per unit of risk. If you would invest  928.00  in Pacific Construction Co on October 23, 2024 and sell it today you would earn a total of  197.00  from holding Pacific Construction Co or generate 21.23% return on investment over 90 days.

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

Pacific Construction Co  vs.  China Times Publishing

Pacific Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Construction Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pacific Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Times Publishing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Times Publishing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Times may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pacific Construction and China Times

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

The idea behind Pacific Construction Co and China Times Publishing 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.