Correlation Between Cheng Fwa and Ability Enterprise

Can any of the company-specific risk be diversified away by investing in both Cheng Fwa and Ability Enterprise 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 Cheng Fwa and Ability Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cheng Fwa Industrial and Ability Enterprise Co, you can compare the effects of market volatilities on Cheng Fwa and Ability Enterprise 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 Cheng Fwa with a short position of Ability Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Fwa and Ability Enterprise.

Diversification Opportunities for Cheng Fwa and Ability Enterprise

-0.11

Correlation Coefficient

Cheng Fwa  Ability Enterprise

Good diversification

The 3 months correlation between Cheng and Ability is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Fwa Industrial and Ability Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ability Enterprise and Cheng Fwa 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 Cheng Fwa Industrial are associated (or correlated) with Ability Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ability Enterprise has no effect on the direction of Cheng Fwa i.e., Cheng Fwa and Ability Enterprise go up and down completely randomly.

Pair Corralation between Cheng Fwa and Ability Enterprise

Assuming the 90 days trading horizon Cheng Fwa Industrial is expected to generate 1.22 times more return on investment than Ability Enterprise. However, Cheng Fwa is 1.22 times more volatile than Ability Enterprise Co. It trades about 0.09 of its potential returns per unit of risk. Ability Enterprise Co is currently generating about 0.09 per unit of risk. If you would invest  1,565  in Cheng Fwa Industrial on September 15, 2024 and sell it today you would earn a total of  1,665  from holding Cheng Fwa Industrial or generate 106.39% return on investment over 90 days.

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

Cheng Fwa Industrial  vs.  Ability Enterprise Co

Cheng Fwa Industrial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Fwa Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cheng Fwa showed solid returns over the last few months and may actually be approaching a breakup point.

Ability Enterprise

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ability Enterprise Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Ability Enterprise is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Cheng Fwa and Ability Enterprise

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

The idea behind Cheng Fwa Industrial and Ability Enterprise Co 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.