Correlation Between Te Chang and Chung Fu

Can any of the company-specific risk be diversified away by investing in both Te Chang and Chung Fu 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 Te Chang and Chung Fu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Te Chang Construction and Chung Fu Tex International, you can compare the effects of market volatilities on Te Chang and Chung Fu 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 Te Chang with a short position of Chung Fu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Te Chang and Chung Fu.

Diversification Opportunities for Te Chang and Chung Fu

-0.19

Correlation Coefficient

Te Chang  Chung Fu

Good diversification

The 3 months correlation between 5511 and Chung is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Te Chang Construction and Chung Fu Tex International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Fu Tex and Te Chang 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 Te Chang Construction are associated (or correlated) with Chung Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Fu Tex has no effect on the direction of Te Chang i.e., Te Chang and Chung Fu go up and down completely randomly.

Pair Corralation between Te Chang and Chung Fu

Assuming the 90 days trading horizon Te Chang is expected to generate 111.64 times less return on investment than Chung Fu. But when comparing it to its historical volatility, Te Chang Construction is 3.74 times less risky than Chung Fu. It trades about 0.0 of its potential returns per unit of risk. Chung Fu Tex International is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,285  in Chung Fu Tex International on December 22, 2024 and sell it today you would earn a total of  895.00  from holding Chung Fu Tex International or generate 27.25% return on investment over 90 days.

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

Te Chang Construction  vs.  Chung Fu Tex International

Te Chang Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Te Chang Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Te Chang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chung Fu Tex

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chung Fu Tex International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chung Fu showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Te Chang and Chung Fu

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

The idea behind Te Chang Construction and Chung Fu Tex International 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.