Correlation Between Tehmag Foods and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both Tehmag Foods and Chung Hwa 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 Tehmag Foods and Chung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tehmag Foods and Chung Hwa Food, you can compare the effects of market volatilities on Tehmag Foods and Chung Hwa 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 Tehmag Foods with a short position of Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tehmag Foods and Chung Hwa.
Diversification Opportunities for Tehmag Foods and Chung Hwa
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tehmag and Chung is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tehmag Foods and Chung Hwa Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Food and Tehmag Foods 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 Tehmag Foods are associated (or correlated) with Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Food has no effect on the direction of Tehmag Foods i.e., Tehmag Foods and Chung Hwa go up and down completely randomly.
Pair Corralation between Tehmag Foods and Chung Hwa
Assuming the 90 days trading horizon Tehmag Foods is expected to under-perform the Chung Hwa. But the stock apears to be less risky and, when comparing its historical volatility, Tehmag Foods is 1.03 times less risky than Chung Hwa. The stock trades about -0.21 of its potential returns per unit of risk. The Chung Hwa Food is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 9,000 in Chung Hwa Food on August 28, 2024 and sell it today you would lose (120.00) from holding Chung Hwa Food or give up 1.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tehmag Foods vs. Chung Hwa Food
Performance |
| Timeline |
| Tehmag Foods |
| Chung Hwa Food |
Tehmag Foods and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tehmag Foods and Chung Hwa
The main advantage of trading using opposite Tehmag Foods and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tehmag Foods position performs unexpectedly, Chung Hwa 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 Chung Hwa will offset losses from the drop in Chung Hwa's long position.| Tehmag Foods vs. Grand Pacific Petrochemical | Tehmag Foods vs. Sunspring Metal Corp | Tehmag Foods vs. Acelon Chemicals Fiber | Tehmag Foods vs. Chi Sheng Chemical |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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