Correlation Between Chahua Modern and China Enterprise

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

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

Diversification Opportunities for Chahua Modern and China Enterprise

-0.09

Correlation Coefficient

Chahua Modern  China Enterprise

Good diversification

The 3 months correlation between Chahua and China is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Chahua Modern Housewares and China Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Enterprise and Chahua Modern 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 Chahua Modern Housewares are associated (or correlated) with China Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Enterprise has no effect on the direction of Chahua Modern i.e., Chahua Modern and China Enterprise go up and down completely randomly.

Pair Corralation between Chahua Modern and China Enterprise

Assuming the 90 days trading horizon Chahua Modern Housewares is expected to generate 2.2 times more return on investment than China Enterprise. However, Chahua Modern is 2.2 times more volatile than China Enterprise Co. It trades about -0.03 of its potential returns per unit of risk. China Enterprise Co is currently generating about -0.44 per unit of risk. If you would invest  2,163  in Chahua Modern Housewares on October 17, 2024 and sell it today you would lose (90.00) from holding Chahua Modern Housewares or give up 4.16% of portfolio value over 90 days.

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

Chahua Modern Housewares  vs.  China Enterprise Co

Chahua Modern Housewares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chahua Modern Housewares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chahua Modern may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Enterprise is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chahua Modern and China Enterprise

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

The idea behind Chahua Modern Housewares and China 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.