Correlation Between China Bills and Chang Hwa
Can any of the company-specific risk be diversified away by investing in both China Bills and Chang Hwa 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 China Bills and Chang Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Bills Finance and Chang Hwa Commercial, you can compare the effects of market volatilities on China Bills and Chang Hwa 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 China Bills with a short position of Chang Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Bills and Chang Hwa.
Diversification Opportunities for China Bills and Chang Hwa
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Chang is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding China Bills Finance and Chang Hwa Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chang Hwa Commercial and China Bills 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 China Bills Finance are associated (or correlated) with Chang Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chang Hwa Commercial has no effect on the direction of China Bills i.e., China Bills and Chang Hwa go up and down completely randomly.
Pair Corralation between China Bills and Chang Hwa
Assuming the 90 days trading horizon China Bills Finance is expected to generate 0.86 times more return on investment than Chang Hwa. However, China Bills Finance is 1.16 times less risky than Chang Hwa. It trades about 0.14 of its potential returns per unit of risk. Chang Hwa Commercial is currently generating about 0.03 per unit of risk. If you would invest 1,505 in China Bills Finance on September 19, 2024 and sell it today you would earn a total of 20.00 from holding China Bills Finance or generate 1.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
China Bills Finance vs. Chang Hwa Commercial
Performance |
Timeline |
China Bills Finance |
Chang Hwa Commercial |
China Bills and Chang Hwa Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with China Bills and Chang Hwa
The main advantage of trading using opposite China Bills and Chang Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Bills position performs unexpectedly, Chang Hwa 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 Chang Hwa will offset losses from the drop in Chang Hwa's long position.China Bills vs. Chang Hwa Commercial | China Bills vs. IBF Financial Holdings | China Bills vs. Taiwan Business Bank | China Bills vs. Yuanta Financial Holdings |
Chang Hwa vs. Central Reinsurance Corp | Chang Hwa vs. Huaku Development Co | Chang Hwa vs. Fubon Financial Holding | Chang Hwa vs. Chailease Holding 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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