Correlation Between Chen Full and China Ecotek

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

By analyzing existing cross correlation between Chen Full International and China Ecotek Corp, you can compare the effects of market volatilities on Chen Full and China Ecotek 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 Chen Full with a short position of China Ecotek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chen Full and China Ecotek.

Diversification Opportunities for Chen Full and China Ecotek

-0.23

Correlation Coefficient

Chen Full  China Ecotek

Very good diversification

The 3 months correlation between Chen and China is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Chen Full International and China Ecotek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Ecotek Corp and Chen Full 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 Chen Full International are associated (or correlated) with China Ecotek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Ecotek Corp has no effect on the direction of Chen Full i.e., Chen Full and China Ecotek go up and down completely randomly.

Pair Corralation between Chen Full and China Ecotek

Assuming the 90 days trading horizon Chen Full International is expected to generate 2.3 times more return on investment than China Ecotek. However, Chen Full is 2.3 times more volatile than China Ecotek Corp. It trades about 0.24 of its potential returns per unit of risk. China Ecotek Corp is currently generating about -0.07 per unit of risk. If you would invest  4,335  in Chen Full International on December 22, 2024 and sell it today you would earn a total of  1,215  from holding Chen Full International or generate 28.03% return on investment over 90 days.

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

Chen Full International  vs.  China Ecotek Corp

Chen Full International

Risk-Adjusted Performance

Solid

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

China Ecotek Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Ecotek Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China Ecotek 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 Chen Full and China Ecotek

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

The idea behind Chen Full International and China Ecotek Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.