Correlation Between Ruentex Development and Ching Feng

Can any of the company-specific risk be diversified away by investing in both Ruentex Development 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 Ruentex Development and Ching Feng 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 Ching Feng Home, you can compare the effects of market volatilities on Ruentex Development 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 Ruentex Development with a short position of Ching Feng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruentex Development and Ching Feng.

Diversification Opportunities for Ruentex Development and Ching Feng

0.69

Correlation Coefficient

Ruentex Development  Ching Feng

Poor diversification

The 3 months correlation between Ruentex and Ching is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co 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 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 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 Ruentex Development i.e., Ruentex Development and Ching Feng go up and down completely randomly.

Pair Corralation between Ruentex Development and Ching Feng

Assuming the 90 days trading horizon Ruentex Development Co is expected to under-perform the Ching Feng. But the stock apears to be less risky and, when comparing its historical volatility, Ruentex Development Co is 2.31 times less risky than Ching Feng. The stock trades about -0.03 of its potential returns per unit of risk. The Ching Feng Home is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,985  in Ching Feng Home on September 13, 2024 and sell it today you would lose (10.00) from holding Ching Feng Home or give up 0.34% of portfolio value over 90 days.

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

Ruentex Development Co  vs.  Ching Feng Home

Ruentex Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruentex Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ruentex Development is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the 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 fairly stable basic indicators, Ching Feng 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 Ruentex Development and Ching Feng

The main advantage of trading using opposite Ruentex Development and Ching Feng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ruentex Development 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 Ruentex Development Co 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..