Correlation Between Wei Chuan and Hsing Ta
Can any of the company-specific risk be diversified away by investing in both Wei Chuan and Hsing Ta 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 Wei Chuan and Hsing Ta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wei Chuan Foods and Hsing Ta Cement, you can compare the effects of market volatilities on Wei Chuan and Hsing Ta 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 Wei Chuan with a short position of Hsing Ta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wei Chuan and Hsing Ta.
Diversification Opportunities for Wei Chuan and Hsing Ta
Very poor diversification
The 3 months correlation between Wei and Hsing is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Wei Chuan Foods and Hsing Ta Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsing Ta Cement and Wei Chuan 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 Wei Chuan Foods are associated (or correlated) with Hsing Ta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsing Ta Cement has no effect on the direction of Wei Chuan i.e., Wei Chuan and Hsing Ta go up and down completely randomly.
Pair Corralation between Wei Chuan and Hsing Ta
Assuming the 90 days trading horizon Wei Chuan Foods is expected to under-perform the Hsing Ta. In addition to that, Wei Chuan is 1.18 times more volatile than Hsing Ta Cement. It trades about -0.1 of its total potential returns per unit of risk. Hsing Ta Cement is currently generating about -0.11 per unit of volatility. If you would invest 1,780 in Hsing Ta Cement on January 12, 2025 and sell it today you would lose (135.00) from holding Hsing Ta Cement or give up 7.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Wei Chuan Foods vs. Hsing Ta Cement
Performance |
| Timeline |
| Wei Chuan Foods |
| Hsing Ta Cement |
Wei Chuan and Hsing Ta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wei Chuan and Hsing Ta
The main advantage of trading using opposite Wei Chuan and Hsing Ta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wei Chuan position performs unexpectedly, Hsing Ta 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 Hsing Ta will offset losses from the drop in Hsing Ta's long position.| Wei Chuan vs. Uni President Enterprises Corp | Wei Chuan vs. Taisun Enterprise Co | Wei Chuan vs. AGV Products Corp | Wei Chuan vs. Great Wall Enterprise |
| Hsing Ta vs. Universal Cement Corp | Hsing Ta vs. Chia Hsin Cement | Hsing Ta vs. AGV Products Corp | Hsing Ta vs. Grand Pacific Petrochemical |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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