Correlation Between Chung Hsin and Chang Type
Can any of the company-specific risk be diversified away by investing in both Chung Hsin and Chang Type 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 Chang Type 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 Chang Type Industrial, you can compare the effects of market volatilities on Chung Hsin and Chang Type 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 Chang Type. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hsin and Chang Type.
Diversification Opportunities for Chung Hsin and Chang Type
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chung and Chang is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Chang Type Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chang Type Industrial 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 Chang Type. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chang Type Industrial has no effect on the direction of Chung Hsin i.e., Chung Hsin and Chang Type go up and down completely randomly.
Pair Corralation between Chung Hsin and Chang Type
Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to generate 0.74 times more return on investment than Chang Type. However, Chung Hsin Electric Machinery is 1.34 times less risky than Chang Type. It trades about -0.06 of its potential returns per unit of risk. Chang Type Industrial is currently generating about -0.13 per unit of risk. If you would invest 15,750 in Chung Hsin Electric Machinery on November 4, 2024 and sell it today you would lose (250.00) from holding Chung Hsin Electric Machinery or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hsin Electric Machinery vs. Chang Type Industrial
Performance |
| Timeline |
| Chung Hsin Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chang Type Industrial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Chung Hsin and Chang Type Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hsin and Chang Type
The main advantage of trading using opposite Chung Hsin and Chang Type positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hsin position performs unexpectedly, Chang Type 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 Chang Type will offset losses from the drop in Chang Type's long position.The idea behind Chung Hsin Electric Machinery and Chang Type Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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