Correlation Between Chung Hsin and Shihlin Electric
Can any of the company-specific risk be diversified away by investing in both Chung Hsin and Shihlin Electric 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 Shihlin Electric 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 Shihlin Electric Engineering, you can compare the effects of market volatilities on Chung Hsin and Shihlin Electric 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 Shihlin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hsin and Shihlin Electric.
Diversification Opportunities for Chung Hsin and Shihlin Electric
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Chung and Shihlin is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Shihlin Electric Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shihlin Electric Eng 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 Shihlin Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shihlin Electric Eng has no effect on the direction of Chung Hsin i.e., Chung Hsin and Shihlin Electric go up and down completely randomly.
Pair Corralation between Chung Hsin and Shihlin Electric
Assuming the 90 days trading horizon Chung Hsin is expected to generate 1.43 times less return on investment than Shihlin Electric. But when comparing it to its historical volatility, Chung Hsin Electric Machinery is 1.17 times less risky than Shihlin Electric. It trades about 0.07 of its potential returns per unit of risk. Shihlin Electric Engineering is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 6,480 in Shihlin Electric Engineering on August 31, 2024 and sell it today you would earn a total of 13,220 from holding Shihlin Electric Engineering or generate 204.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
Chung Hsin Electric Machinery vs. Shihlin Electric Engineering
Performance |
| Timeline |
| Chung Hsin Electric |
| Shihlin Electric Eng |
Chung Hsin and Shihlin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hsin and Shihlin Electric
The main advantage of trading using opposite Chung Hsin and Shihlin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hsin position performs unexpectedly, Shihlin Electric 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 Shihlin Electric will offset losses from the drop in Shihlin Electric'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 |
| Shihlin Electric vs. TECO Electric Machinery | Shihlin Electric vs. Walsin Lihwa Corp | Shihlin Electric vs. Formosa Taffeta Co | Shihlin Electric vs. Far Eastern New |
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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