Correlation Between Chung Hsin and Taiwan Cement
Can any of the company-specific risk be diversified away by investing in both Chung Hsin and Taiwan Cement 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 Chung Hsin and Taiwan Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hsin Electric Machinery and Taiwan Cement Corp, you can compare the effects of market volatilities on Chung Hsin and Taiwan Cement 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 Chung Hsin with a short position of Taiwan Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hsin and Taiwan Cement.
Diversification Opportunities for Chung Hsin and Taiwan Cement
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Chung and Taiwan is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Taiwan Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cement Corp and Chung Hsin 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 Chung Hsin Electric Machinery are associated (or correlated) with Taiwan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cement Corp has no effect on the direction of Chung Hsin i.e., Chung Hsin and Taiwan Cement go up and down completely randomly.
Pair Corralation between Chung Hsin and Taiwan Cement
Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to generate 2.74 times more return on investment than Taiwan Cement. However, Chung Hsin is 2.74 times more volatile than Taiwan Cement Corp. It trades about 0.07 of its potential returns per unit of risk. Taiwan Cement Corp is currently generating about 0.0 per unit of risk. If you would invest 7,320 in Chung Hsin Electric Machinery on August 31, 2024 and sell it today you would earn a total of 8,480 from holding Chung Hsin Electric Machinery or generate 115.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hsin Electric Machinery vs. Taiwan Cement Corp
Performance |
| Timeline |
| Chung Hsin Electric |
| Taiwan Cement Corp |
Chung Hsin and Taiwan Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hsin and Taiwan Cement
The main advantage of trading using opposite Chung Hsin and Taiwan Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hsin position performs unexpectedly, Taiwan Cement 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 Taiwan Cement will offset losses from the drop in Taiwan Cement's long position.| Chung Hsin vs. BES Engineering Co | Chung Hsin vs. Continental Holdings Corp | Chung Hsin vs. Kee Tai Properties | Chung Hsin vs. Hung Sheng Construction |
| Taiwan Cement vs. Basso Industry Corp | Taiwan Cement vs. Chung Hsin Electric Machinery | Taiwan Cement vs. TYC Brother Industrial | Taiwan Cement vs. TECO Electric Machinery |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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