Correlation Between Chuangs China and Ibiden CoLtd

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

By analyzing existing cross correlation between Chuangs China Investments and Ibiden CoLtd, you can compare the effects of market volatilities on Chuangs China and Ibiden CoLtd 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 Chuangs China with a short position of Ibiden CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chuangs China and Ibiden CoLtd.

Diversification Opportunities for Chuangs China and Ibiden CoLtd

0.1

Correlation Coefficient

Chuangs China  Ibiden CoLtd

Average diversification

The 3 months correlation between Chuangs and Ibiden is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Chuangs China Investments and Ibiden CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ibiden CoLtd and Chuangs China 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 Chuangs China Investments are associated (or correlated) with Ibiden CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ibiden CoLtd has no effect on the direction of Chuangs China i.e., Chuangs China and Ibiden CoLtd go up and down completely randomly.

Pair Corralation between Chuangs China and Ibiden CoLtd

Assuming the 90 days horizon Chuangs China Investments is expected to under-perform the Ibiden CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, Chuangs China Investments is 1.25 times less risky than Ibiden CoLtd. The stock trades about -0.01 of its potential returns per unit of risk. The Ibiden CoLtd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  977.00  in Ibiden CoLtd on October 8, 2024 and sell it today you would earn a total of  2,023  from holding Ibiden CoLtd or generate 207.06% return on investment over 90 days.

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

Chuangs China Investments  vs.  Ibiden CoLtd

Chuangs China Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chuangs China Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chuangs China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ibiden CoLtd

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ibiden CoLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Ibiden CoLtd may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chuangs China and Ibiden CoLtd

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

The idea behind Chuangs China Investments and Ibiden CoLtd 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.