Correlation Between Nien Made and Ching Feng

Can any of the company-specific risk be diversified away by investing in both Nien Made and Ching Feng 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 Nien Made and Ching Feng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nien Made Enterprise and Ching Feng Home, you can compare the effects of market volatilities on Nien Made and Ching Feng 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 Nien Made with a short position of Ching Feng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nien Made and Ching Feng.

Diversification Opportunities for Nien Made and Ching Feng

0.87

Correlation Coefficient

Nien Made  Ching Feng

Very poor diversification

The 3 months correlation between Nien and Ching is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nien Made Enterprise and Ching Feng Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ching Feng Home and Nien Made 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 Nien Made Enterprise are associated (or correlated) with Ching Feng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ching Feng Home has no effect on the direction of Nien Made i.e., Nien Made and Ching Feng go up and down completely randomly.

Pair Corralation between Nien Made and Ching Feng

Assuming the 90 days trading horizon Nien Made Enterprise is expected to generate 1.57 times more return on investment than Ching Feng. However, Nien Made is 1.57 times more volatile than Ching Feng Home. It trades about 0.11 of its potential returns per unit of risk. Ching Feng Home is currently generating about -0.1 per unit of risk. If you would invest  39,500  in Nien Made Enterprise on October 11, 2024 and sell it today you would earn a total of  2,100  from holding Nien Made Enterprise or generate 5.32% return on investment over 90 days.

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

Nien Made Enterprise  vs.  Ching Feng Home

Nien Made Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ching Feng Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ching Feng Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Nien Made and Ching Feng

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

The idea behind Nien Made Enterprise and Ching Feng Home 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.