Correlation Between Lee Chi and Chung Hsin
Can any of the company-specific risk be diversified away by investing in both Lee Chi and Chung Hsin 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 Lee Chi and Chung Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lee Chi Enterprises and Chung Hsin Electric Machinery, you can compare the effects of market volatilities on Lee Chi and Chung Hsin 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 Lee Chi with a short position of Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lee Chi and Chung Hsin.
Diversification Opportunities for Lee Chi and Chung Hsin
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lee and Chung is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lee Chi Enterprises and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric and Lee Chi 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 Lee Chi Enterprises are associated (or correlated) with Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of Lee Chi i.e., Lee Chi and Chung Hsin go up and down completely randomly.
Pair Corralation between Lee Chi and Chung Hsin
Assuming the 90 days trading horizon Lee Chi Enterprises is expected to under-perform the Chung Hsin. But the stock apears to be less risky and, when comparing its historical volatility, Lee Chi Enterprises is 2.31 times less risky than Chung Hsin. The stock trades about -0.25 of its potential returns per unit of risk. The Chung Hsin Electric Machinery is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 16,050 in Chung Hsin Electric Machinery on September 4, 2024 and sell it today you would lose (300.00) from holding Chung Hsin Electric Machinery or give up 1.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Lee Chi Enterprises vs. Chung Hsin Electric Machinery
Performance |
| Timeline |
| Lee Chi Enterprises |
| Chung Hsin Electric |
Lee Chi and Chung Hsin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lee Chi and Chung Hsin
The main advantage of trading using opposite Lee Chi and Chung Hsin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lee Chi position performs unexpectedly, Chung Hsin 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 Chung Hsin will offset losses from the drop in Chung Hsin's long position.| Lee Chi vs. Tainan Spinning Co | Lee Chi vs. Chia Her Industrial | Lee Chi vs. WiseChip Semiconductor | Lee Chi vs. Novatek Microelectronics Corp |
| Chung Hsin vs. TECO Electric Machinery | Chung Hsin vs. Fortune Electric Co | Chung Hsin vs. Taiwan Cement Corp | Chung Hsin vs. Walsin Lihwa Corp |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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