Correlation Between Simple Mart and Cheng Mei
Can any of the company-specific risk be diversified away by investing in both Simple Mart and Cheng Mei 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 Simple Mart and Cheng Mei into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Simple Mart Retail and Cheng Mei Materials, you can compare the effects of market volatilities on Simple Mart and Cheng Mei 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 Simple Mart with a short position of Cheng Mei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simple Mart and Cheng Mei.
Diversification Opportunities for Simple Mart and Cheng Mei
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Simple and Cheng is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Simple Mart Retail and Cheng Mei Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Mei Materials and Simple Mart 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 Simple Mart Retail are associated (or correlated) with Cheng Mei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Mei Materials has no effect on the direction of Simple Mart i.e., Simple Mart and Cheng Mei go up and down completely randomly.
Pair Corralation between Simple Mart and Cheng Mei
Assuming the 90 days trading horizon Simple Mart is expected to generate 27.39 times less return on investment than Cheng Mei. But when comparing it to its historical volatility, Simple Mart Retail is 1.79 times less risky than Cheng Mei. It trades about 0.0 of its potential returns per unit of risk. Cheng Mei Materials is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 986.00 in Cheng Mei Materials on September 20, 2024 and sell it today you would earn a total of 324.00 from holding Cheng Mei Materials or generate 32.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Simple Mart Retail vs. Cheng Mei Materials
Performance |
Timeline |
Simple Mart Retail |
Cheng Mei Materials |
Simple Mart and Cheng Mei Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Simple Mart and Cheng Mei
The main advantage of trading using opposite Simple Mart and Cheng Mei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simple Mart position performs unexpectedly, Cheng Mei 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 Cheng Mei will offset losses from the drop in Cheng Mei's long position.Simple Mart vs. Taiwan Semiconductor Manufacturing | Simple Mart vs. Hon Hai Precision | Simple Mart vs. MediaTek | Simple Mart vs. Chunghwa Telecom Co |
Cheng Mei vs. AU Optronics | Cheng Mei vs. Innolux Corp | Cheng Mei vs. Ruentex Development Co | Cheng Mei vs. Novatek Microelectronics Corp |
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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