Correlation Between China Times and C Media

Can any of the company-specific risk be diversified away by investing in both China Times and C Media 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 C Media 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 C Media Electronics, you can compare the effects of market volatilities on China Times and C Media 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 C Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Times and C Media.

Diversification Opportunities for China Times and C Media

0.29

Correlation Coefficient

China Times  C Media

Modest diversification

The 3 months correlation between China and 6237 is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding China Times Publishing and C Media Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C Media Electronics 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 C Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C Media Electronics has no effect on the direction of China Times i.e., China Times and C Media go up and down completely randomly.

Pair Corralation between China Times and C Media

Assuming the 90 days trading horizon China Times is expected to generate 1.28 times less return on investment than C Media. In addition to that, China Times is 1.85 times more volatile than C Media Electronics. It trades about 0.04 of its total potential returns per unit of risk. C Media Electronics is currently generating about 0.1 per unit of volatility. If you would invest  4,380  in C Media Electronics on September 13, 2024 and sell it today you would earn a total of  650.00  from holding C Media Electronics or generate 14.84% 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.  C Media Electronics

China Times Publishing

Risk-Adjusted Performance

3 of 100

Weak

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.

C Media Electronics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in C Media Electronics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, C Media showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Times and C Media

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

The idea behind China Times Publishing and C Media Electronics 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.