Correlation Between Ruentex Development and China General
Can any of the company-specific risk be diversified away by investing in both Ruentex Development and China General 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 Ruentex Development and China General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ruentex Development Co and China General Plastics, you can compare the effects of market volatilities on Ruentex Development and China General 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 Ruentex Development with a short position of China General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruentex Development and China General.
Diversification Opportunities for Ruentex Development and China General
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ruentex and China is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and China General Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China General Plastics and Ruentex Development 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 Ruentex Development Co are associated (or correlated) with China General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China General Plastics has no effect on the direction of Ruentex Development i.e., Ruentex Development and China General go up and down completely randomly.
Pair Corralation between Ruentex Development and China General
Assuming the 90 days trading horizon Ruentex Development Co is expected to under-perform the China General. But the stock apears to be less risky and, when comparing its historical volatility, Ruentex Development Co is 1.38 times less risky than China General. The stock trades about -0.18 of its potential returns per unit of risk. The China General Plastics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,200 in China General Plastics on December 29, 2024 and sell it today you would earn a total of 40.00 from holding China General Plastics or generate 3.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Ruentex Development Co vs. China General Plastics
Performance |
Timeline |
Ruentex Development |
China General Plastics |
Ruentex Development and China General Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ruentex Development and China General
The main advantage of trading using opposite Ruentex Development and China General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ruentex Development position performs unexpectedly, China General 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 General will offset losses from the drop in China General's long position.Ruentex Development vs. Ruentex Industries | Ruentex Development vs. Pou Chen Corp | Ruentex Development vs. Fubon Financial Holding | Ruentex Development vs. Cathay Financial Holding |
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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