Correlation Between Lectricite and Chow Tai

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

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

Diversification Opportunities for Lectricite and Chow Tai

0.54

Correlation Coefficient

Lectricite  Chow Tai

Very weak diversification

The 3 months correlation between Lectricite and Chow is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding lectricite de Strasbourg 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 Lectricite 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 lectricite de Strasbourg 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 Lectricite i.e., Lectricite and Chow Tai go up and down completely randomly.

Pair Corralation between Lectricite and Chow Tai

Assuming the 90 days trading horizon lectricite de Strasbourg is expected to generate 0.44 times more return on investment than Chow Tai. However, lectricite de Strasbourg is 2.29 times less risky than Chow Tai. It trades about 0.1 of its potential returns per unit of risk. Chow Tai Fook is currently generating about -0.03 per unit of risk. If you would invest  8,562  in lectricite de Strasbourg on January 21, 2024 and sell it today you would earn a total of  3,038  from holding lectricite de Strasbourg or generate 35.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.02%
Values	Daily Returns

lectricite de Strasbourg  vs.  Chow Tai Fook

lectricite de Strasbourg

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in lectricite de Strasbourg are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lectricite sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Lectricite and Chow Tai

The main advantage of trading using opposite Lectricite and Chow Tai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lectricite 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 lectricite de Strasbourg 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.