Correlation Between Chung Hwa and Cheng Shin
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Cheng Shin 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 Hwa and Cheng Shin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hwa Chemical and Cheng Shin Rubber, you can compare the effects of market volatilities on Chung Hwa and Cheng Shin 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 Hwa with a short position of Cheng Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Cheng Shin.
Diversification Opportunities for Chung Hwa and Cheng Shin
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Chung and Cheng is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Chemical and Cheng Shin Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Shin Rubber and Chung Hwa 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 Hwa Chemical are associated (or correlated) with Cheng Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Shin Rubber has no effect on the direction of Chung Hwa i.e., Chung Hwa and Cheng Shin go up and down completely randomly.
Pair Corralation between Chung Hwa and Cheng Shin
Assuming the 90 days trading horizon Chung Hwa Chemical is expected to under-perform the Cheng Shin. In addition to that, Chung Hwa is 1.15 times more volatile than Cheng Shin Rubber. It trades about -0.15 of its total potential returns per unit of risk. Cheng Shin Rubber is currently generating about 0.0 per unit of volatility. If you would invest 5,180 in Cheng Shin Rubber on August 30, 2024 and sell it today you would lose (80.00) from holding Cheng Shin Rubber or give up 1.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hwa Chemical vs. Cheng Shin Rubber
Performance |
| Timeline |
| Chung Hwa Chemical |
| Cheng Shin Rubber |
Chung Hwa and Cheng Shin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hwa and Cheng Shin
The main advantage of trading using opposite Chung Hwa and Cheng Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, Cheng Shin 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 Cheng Shin will offset losses from the drop in Cheng Shin's long position.| Chung Hwa vs. Oriental Union Chemical | Chung Hwa vs. Everlight Chemical Industrial | Chung Hwa vs. Formosan Union Chemical | Chung Hwa vs. Sesoda Corp |
| Cheng Shin vs. Uni President Enterprises Corp | Cheng Shin vs. Formosa Chemicals Fibre | Cheng Shin vs. Asia Cement Corp | Cheng Shin vs. Pou Chen 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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