Correlation Between Chong Hong and Advanced Ceramic

Can any of the company-specific risk be diversified away by investing in both Chong Hong and Advanced Ceramic 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 Chong Hong and Advanced Ceramic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chong Hong Construction and Advanced Ceramic X, you can compare the effects of market volatilities on Chong Hong and Advanced Ceramic 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 Chong Hong with a short position of Advanced Ceramic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chong Hong and Advanced Ceramic.

Diversification Opportunities for Chong Hong and Advanced Ceramic

-0.25

Correlation Coefficient

Chong Hong  Advanced Ceramic

Very good diversification

The 3 months correlation between Chong and Advanced is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Chong Hong Construction and Advanced Ceramic X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Ceramic X and Chong Hong 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 Chong Hong Construction are associated (or correlated) with Advanced Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Ceramic X has no effect on the direction of Chong Hong i.e., Chong Hong and Advanced Ceramic go up and down completely randomly.

Pair Corralation between Chong Hong and Advanced Ceramic

Assuming the 90 days trading horizon Chong Hong Construction is expected to generate 1.13 times more return on investment than Advanced Ceramic. However, Chong Hong is 1.13 times more volatile than Advanced Ceramic X. It trades about 0.23 of its potential returns per unit of risk. Advanced Ceramic X is currently generating about -0.18 per unit of risk. If you would invest  8,650  in Chong Hong Construction on December 25, 2024 and sell it today you would earn a total of  2,100  from holding Chong Hong Construction or generate 24.28% return on investment over 90 days.

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

Chong Hong Construction  vs.  Advanced Ceramic X

Chong Hong Construction

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chong Hong Construction are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chong Hong showed solid returns over the last few months and may actually be approaching a breakup point.

Advanced Ceramic X

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Ceramic X has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Chong Hong and Advanced Ceramic

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

The idea behind Chong Hong Construction and Advanced Ceramic X 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.