Correlation Between Chung Hsin and Everlight Chemical
Can any of the company-specific risk be diversified away by investing in both Chung Hsin and Everlight Chemical 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 Everlight Chemical 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 Everlight Chemical Industrial, you can compare the effects of market volatilities on Chung Hsin and Everlight Chemical 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 Everlight Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hsin and Everlight Chemical.
Diversification Opportunities for Chung Hsin and Everlight Chemical
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chung and Everlight is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Everlight Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everlight Chemical 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 Everlight Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everlight Chemical has no effect on the direction of Chung Hsin i.e., Chung Hsin and Everlight Chemical go up and down completely randomly.
Pair Corralation between Chung Hsin and Everlight Chemical
Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to generate 1.4 times more return on investment than Everlight Chemical. However, Chung Hsin is 1.4 times more volatile than Everlight Chemical Industrial. It trades about 0.08 of its potential returns per unit of risk. Everlight Chemical Industrial is currently generating about 0.03 per unit of risk. If you would invest 6,400 in Chung Hsin Electric Machinery on September 2, 2024 and sell it today you would earn a total of 9,400 from holding Chung Hsin Electric Machinery or generate 146.88% 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. Everlight Chemical Industrial
Performance |
| Timeline |
| Chung Hsin Electric |
| Everlight Chemical |
Chung Hsin and Everlight Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hsin and Everlight Chemical
The main advantage of trading using opposite Chung Hsin and Everlight Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hsin position performs unexpectedly, Everlight Chemical 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 Everlight Chemical will offset losses from the drop in Everlight Chemical'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 |
| Everlight Chemical vs. Oriental Union Chemical | Everlight Chemical vs. Ho Tung Chemical | Everlight Chemical vs. China Man Made Fiber | Everlight Chemical vs. Sunko Ink Co |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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