Correlation Between Better Choice and Chow Tai

Can any of the company-specific risk be diversified away by investing in both Better Choice and Chow Tai 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 Better Choice and Chow Tai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Better Choice and Chow Tai Fook, you can compare the effects of market volatilities on Better Choice and Chow Tai 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 Better Choice with a short position of Chow Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Better Choice and Chow Tai.

Diversification Opportunities for Better Choice and Chow Tai

-0.34

Correlation Coefficient

Better Choice  Chow Tai

Very good diversification

The 3 months correlation between Better and Chow is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Better Choice and Chow Tai Fook in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chow Tai Fook and Better Choice 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 Better Choice are associated (or correlated) with Chow Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chow Tai Fook has no effect on the direction of Better Choice i.e., Better Choice and Chow Tai go up and down completely randomly.

Pair Corralation between Better Choice and Chow Tai

Given the investment horizon of 90 days Better Choice is expected to generate 5.3 times more return on investment than Chow Tai. However, Better Choice is 5.3 times more volatile than Chow Tai Fook. It trades about 0.04 of its potential returns per unit of risk. Chow Tai Fook is currently generating about -0.06 per unit of risk. If you would invest  768.00  in Better Choice on January 25, 2024 and sell it today you would lose (86.00) from holding Better Choice or give up 11.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

Better Choice  vs.  Chow Tai Fook

Better Choice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better Choice has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Better Choice may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Chow Tai Fook

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chow Tai Fook has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chow Tai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Better Choice and Chow Tai

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

The idea behind Better Choice and Chow Tai Fook 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.