Correlation Between Chung Hsin and China Petrochemical
Can any of the company-specific risk be diversified away by investing in both Chung Hsin and China Petrochemical 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 China Petrochemical 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 China Petrochemical Development, you can compare the effects of market volatilities on Chung Hsin and China Petrochemical 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 China Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hsin and China Petrochemical.
Diversification Opportunities for Chung Hsin and China Petrochemical
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chung and China is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and China Petrochemical Developmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petrochemical 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 China Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petrochemical has no effect on the direction of Chung Hsin i.e., Chung Hsin and China Petrochemical go up and down completely randomly.
Pair Corralation between Chung Hsin and China Petrochemical
Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the China Petrochemical. In addition to that, Chung Hsin is 1.37 times more volatile than China Petrochemical Development. It trades about -0.01 of its total potential returns per unit of risk. China Petrochemical Development is currently generating about 0.06 per unit of volatility. If you would invest 801.00 in China Petrochemical Development on September 1, 2024 and sell it today you would earn a total of 14.00 from holding China Petrochemical Development or generate 1.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hsin Electric Machinery vs. China Petrochemical Developmen
Performance |
| Timeline |
| Chung Hsin Electric |
| China Petrochemical |
Chung Hsin and China Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hsin and China Petrochemical
The main advantage of trading using opposite Chung Hsin and China Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hsin position performs unexpectedly, China Petrochemical 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 China Petrochemical will offset losses from the drop in China Petrochemical'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 |
| China Petrochemical vs. Basso Industry Corp | China Petrochemical vs. Chung Hsin Electric Machinery | China Petrochemical vs. TYC Brother Industrial | China Petrochemical 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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