Correlation Between Champion Building and Cheng Loong

Can any of the company-specific risk be diversified away by investing in both Champion Building and Cheng Loong 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 Champion Building and Cheng Loong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Champion Building Materials and Cheng Loong Corp, you can compare the effects of market volatilities on Champion Building and Cheng Loong 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 Champion Building with a short position of Cheng Loong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Building and Cheng Loong.

Diversification Opportunities for Champion Building and Cheng Loong

0.61

Correlation Coefficient

Champion Building  Cheng Loong

Poor diversification

The 3 months correlation between Champion and Cheng is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Champion Building Materials and Cheng Loong Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Loong Corp and Champion Building 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 Champion Building Materials are associated (or correlated) with Cheng Loong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Loong Corp has no effect on the direction of Champion Building i.e., Champion Building and Cheng Loong go up and down completely randomly.

Pair Corralation between Champion Building and Cheng Loong

Assuming the 90 days trading horizon Champion Building Materials is expected to generate 2.29 times more return on investment than Cheng Loong. However, Champion Building is 2.29 times more volatile than Cheng Loong Corp. It trades about -0.06 of its potential returns per unit of risk. Cheng Loong Corp is currently generating about -0.22 per unit of risk. If you would invest  1,200  in Champion Building Materials on September 12, 2024 and sell it today you would lose (115.00) from holding Champion Building Materials or give up 9.58% of portfolio value over 90 days.

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

Champion Building Materials  vs.  Cheng Loong Corp

Champion Building

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Cheng Loong Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheng Loong Corp 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.

Pair Trading with Champion Building and Cheng Loong

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

The idea behind Champion Building Materials and Cheng Loong Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.