Correlation Between Chi Hua and CHC Healthcare

Can any of the company-specific risk be diversified away by investing in both Chi Hua and CHC Healthcare 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 Chi Hua and CHC Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chi Hua Fitness and CHC Healthcare Group, you can compare the effects of market volatilities on Chi Hua and CHC Healthcare 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 Chi Hua with a short position of CHC Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chi Hua and CHC Healthcare.

Diversification Opportunities for Chi Hua and CHC Healthcare

0.6

Correlation Coefficient

Chi Hua  CHC Healthcare

Poor diversification

The 3 months correlation between Chi and CHC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Chi Hua Fitness and CHC Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHC Healthcare Group and Chi Hua 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 Chi Hua Fitness are associated (or correlated) with CHC Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHC Healthcare Group has no effect on the direction of Chi Hua i.e., Chi Hua and CHC Healthcare go up and down completely randomly.

Pair Corralation between Chi Hua and CHC Healthcare

Assuming the 90 days trading horizon Chi Hua Fitness is expected to under-perform the CHC Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Chi Hua Fitness is 1.29 times less risky than CHC Healthcare. The stock trades about -0.13 of its potential returns per unit of risk. The CHC Healthcare Group is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,305  in CHC Healthcare Group on September 26, 2024 and sell it today you would lose (215.00) from holding CHC Healthcare Group or give up 4.99% of portfolio value over 90 days.

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

Chi Hua Fitness  vs.  CHC Healthcare Group

Chi Hua Fitness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chi Hua Fitness has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

CHC Healthcare Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHC Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CHC Healthcare 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 Chi Hua and CHC Healthcare

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

The idea behind Chi Hua Fitness and CHC Healthcare Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.