Correlation Between IBF Financial and China Development
Can any of the company-specific risk be diversified away by investing in both IBF Financial and China Development 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 IBF Financial and China Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IBF Financial Holdings and China Development Financial, you can compare the effects of market volatilities on IBF Financial and China Development 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 IBF Financial with a short position of China Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBF Financial and China Development.
Diversification Opportunities for IBF Financial and China Development
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between IBF and China is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding IBF Financial Holdings and China Development Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Development and IBF Financial 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 IBF Financial Holdings are associated (or correlated) with China Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Development has no effect on the direction of IBF Financial i.e., IBF Financial and China Development go up and down completely randomly.
Pair Corralation between IBF Financial and China Development
Assuming the 90 days trading horizon IBF Financial Holdings is expected to under-perform the China Development. But the stock apears to be less risky and, when comparing its historical volatility, IBF Financial Holdings is 1.14 times less risky than China Development. The stock trades about -0.17 of its potential returns per unit of risk. The China Development Financial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 1,700 in China Development Financial on December 5, 2024 and sell it today you would earn a total of 120.00 from holding China Development Financial or generate 7.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
IBF Financial Holdings vs. China Development Financial
Performance |
Timeline |
IBF Financial Holdings |
China Development |
IBF Financial and China Development Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IBF Financial and China Development
The main advantage of trading using opposite IBF Financial and China Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IBF Financial position performs unexpectedly, China Development 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 Development will offset losses from the drop in China Development's long position.IBF Financial vs. HIM International Music | IBF Financial vs. TECO Electric Machinery | IBF Financial vs. Chien Kuo Construction | IBF Financial vs. Te Chang Construction |
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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