Correlation Between Chia Her and Tung Ho
Can any of the company-specific risk be diversified away by investing in both Chia Her and Tung Ho 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 Chia Her and Tung Ho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chia Her Industrial and Tung Ho Textile, you can compare the effects of market volatilities on Chia Her and Tung Ho 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 Chia Her with a short position of Tung Ho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia Her and Tung Ho.
Diversification Opportunities for Chia Her and Tung Ho
Significant diversification
The 3 months correlation between Chia and Tung is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Chia Her Industrial and Tung Ho Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Ho Textile and Chia Her 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 Chia Her Industrial are associated (or correlated) with Tung Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Ho Textile has no effect on the direction of Chia Her i.e., Chia Her and Tung Ho go up and down completely randomly.
Pair Corralation between Chia Her and Tung Ho
Assuming the 90 days trading horizon Chia Her is expected to generate 1.75 times less return on investment than Tung Ho. In addition to that, Chia Her is 1.43 times more volatile than Tung Ho Textile. It trades about 0.03 of its total potential returns per unit of risk. Tung Ho Textile is currently generating about 0.07 per unit of volatility. If you would invest 1,765 in Tung Ho Textile on September 4, 2024 and sell it today you would earn a total of 630.00 from holding Tung Ho Textile or generate 35.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chia Her Industrial vs. Tung Ho Textile
Performance |
| Timeline |
| Chia Her Industrial |
| Tung Ho Textile |
Chia Her and Tung Ho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chia Her and Tung Ho
The main advantage of trading using opposite Chia Her and Tung Ho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chia Her position performs unexpectedly, Tung Ho 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 Tung Ho will offset losses from the drop in Tung Ho's long position.| Chia Her vs. Carnival Industrial Corp | Chia Her vs. I Hwa Industrial Co | Chia Her vs. Hung Chou Fiber | Chia Her vs. Tung Ho Textile |
| Tung Ho vs. Tainan Spinning Co | Tung Ho vs. Chia Her Industrial | Tung Ho vs. WiseChip Semiconductor | Tung Ho vs. Novatek Microelectronics Corp |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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