Correlation Between Chung Hsin and Taiwan Hon
Can any of the company-specific risk be diversified away by investing in both Chung Hsin and Taiwan Hon 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 Hon 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 Hon Chuan, you can compare the effects of market volatilities on Chung Hsin and Taiwan Hon 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 Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hsin and Taiwan Hon.
Diversification Opportunities for Chung Hsin and Taiwan Hon
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chung and Taiwan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Taiwan Hon Chuan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hon Chuan 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 Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hon Chuan has no effect on the direction of Chung Hsin i.e., Chung Hsin and Taiwan Hon go up and down completely randomly.
Pair Corralation between Chung Hsin and Taiwan Hon
Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to generate 1.25 times more return on investment than Taiwan Hon. However, Chung Hsin is 1.25 times more volatile than Taiwan Hon Chuan. It trades about -0.03 of its potential returns per unit of risk. Taiwan Hon Chuan is currently generating about -0.1 per unit of risk. If you would invest 16,350 in Chung Hsin Electric Machinery on September 12, 2024 and sell it today you would lose (650.00) from holding Chung Hsin Electric Machinery or give up 3.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Chung Hsin Electric Machinery vs. Taiwan Hon Chuan
Performance |
| Timeline |
| Chung Hsin Electric |
| Taiwan Hon Chuan |
Chung Hsin and Taiwan Hon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hsin and Taiwan Hon
The main advantage of trading using opposite Chung Hsin and Taiwan Hon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hsin position performs unexpectedly, Taiwan Hon 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 Hon will offset losses from the drop in Taiwan Hon's long position.| Chung Hsin vs. TECO Electric Machinery | Chung Hsin vs. Fortune Electric Co | Chung Hsin vs. Taiwan Cement Corp | Chung Hsin vs. Walsin Lihwa Corp |
| Taiwan Hon vs. China Mobile | Taiwan Hon vs. TWOWAY Communications | Taiwan Hon vs. X Legend Entertainment Co | Taiwan Hon vs. Gamania Digital Entertainment |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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