Correlation Between China Times and Fortune Information

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

By analyzing existing cross correlation between China Times Publishing and Fortune Information Systems, you can compare the effects of market volatilities on China Times and Fortune Information 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 China Times with a short position of Fortune Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Times and Fortune Information.

Diversification Opportunities for China Times and Fortune Information

0.32

Correlation Coefficient

China Times  Fortune Information

Weak diversification

The 3 months correlation between China and Fortune is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding China Times Publishing and Fortune Information Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Information and China Times 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 China Times Publishing are associated (or correlated) with Fortune Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Information has no effect on the direction of China Times i.e., China Times and Fortune Information go up and down completely randomly.

Pair Corralation between China Times and Fortune Information

Assuming the 90 days trading horizon China Times is expected to generate 1.79 times less return on investment than Fortune Information. In addition to that, China Times is 1.7 times more volatile than Fortune Information Systems. It trades about 0.04 of its total potential returns per unit of risk. Fortune Information Systems is currently generating about 0.13 per unit of volatility. If you would invest  2,290  in Fortune Information Systems on September 13, 2024 and sell it today you would earn a total of  500.00  from holding Fortune Information Systems or generate 21.83% return on investment over 90 days.

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

China Times Publishing  vs.  Fortune Information Systems

China Times Publishing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Times Publishing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Times may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fortune Information

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortune Information Systems are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fortune Information showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Times and Fortune Information

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

The idea behind China Times Publishing and Fortune Information Systems 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.