Correlation Between Chong Hong and Kunyue Development
Can any of the company-specific risk be diversified away by investing in both Chong Hong and Kunyue 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 Chong Hong and Kunyue Development 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 Kunyue Development Co, you can compare the effects of market volatilities on Chong Hong and Kunyue 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 Chong Hong with a short position of Kunyue Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chong Hong and Kunyue Development.
Diversification Opportunities for Chong Hong and Kunyue Development
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Chong and Kunyue is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Chong Hong Construction and Kunyue Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunyue Development 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 Kunyue Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunyue Development has no effect on the direction of Chong Hong i.e., Chong Hong and Kunyue Development go up and down completely randomly.
Pair Corralation between Chong Hong and Kunyue Development
Assuming the 90 days trading horizon Chong Hong Construction is expected to under-perform the Kunyue Development. But the stock apears to be less risky and, when comparing its historical volatility, Chong Hong Construction is 1.15 times less risky than Kunyue Development. The stock trades about -0.12 of its potential returns per unit of risk. The Kunyue Development Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,915 in Kunyue Development Co on October 6, 2024 and sell it today you would earn a total of 370.00 from holding Kunyue Development Co or generate 9.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.44% |
Values | Daily Returns |
Chong Hong Construction vs. Kunyue Development Co
Performance |
Timeline |
Chong Hong Construction |
Kunyue Development |
Chong Hong and Kunyue Development Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chong Hong and Kunyue Development
The main advantage of trading using opposite Chong Hong and Kunyue Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chong Hong position performs unexpectedly, Kunyue 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 Kunyue Development will offset losses from the drop in Kunyue Development's long position.Chong Hong vs. Huaku Development Co | ||
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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