Correlation Between Chi Hua and Fu Burg

Can any of the company-specific risk be diversified away by investing in both Chi Hua and Fu Burg 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 Fu Burg 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 Fu Burg Industrial, you can compare the effects of market volatilities on Chi Hua and Fu Burg 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 Fu Burg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chi Hua and Fu Burg.

Diversification Opportunities for Chi Hua and Fu Burg

-0.44

Correlation Coefficient

Chi Hua  Fu Burg

Very good diversification

The 3 months correlation between Chi and 8929 is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Chi Hua Fitness and Fu Burg Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fu Burg Industrial 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 Fu Burg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fu Burg Industrial has no effect on the direction of Chi Hua i.e., Chi Hua and Fu Burg go up and down completely randomly.

Pair Corralation between Chi Hua and Fu Burg

Assuming the 90 days trading horizon Chi Hua Fitness is expected to generate 7.31 times more return on investment than Fu Burg. However, Chi Hua is 7.31 times more volatile than Fu Burg Industrial. It trades about 0.03 of its potential returns per unit of risk. Fu Burg Industrial is currently generating about 0.03 per unit of risk. If you would invest  5,999  in Chi Hua Fitness on September 26, 2024 and sell it today you would lose (2,349) from holding Chi Hua Fitness or give up 39.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Chi Hua Fitness  vs.  Fu Burg Industrial

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.

Fu Burg Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fu Burg Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fu Burg may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chi Hua and Fu Burg

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

The idea behind Chi Hua Fitness and Fu Burg Industrial 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.