Correlation Between Chung Hwa and Taiwan Steel
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Taiwan Steel 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 Taiwan Steel 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 Taiwan Steel Union, you can compare the effects of market volatilities on Chung Hwa and Taiwan Steel 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 Taiwan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Taiwan Steel.
Diversification Opportunities for Chung Hwa and Taiwan Steel
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Chung and Taiwan is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Chemical and Taiwan Steel Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Steel Union 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 Taiwan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Steel Union has no effect on the direction of Chung Hwa i.e., Chung Hwa and Taiwan Steel go up and down completely randomly.
Pair Corralation between Chung Hwa and Taiwan Steel
Assuming the 90 days trading horizon Chung Hwa Chemical is expected to generate 2.02 times more return on investment than Taiwan Steel. However, Chung Hwa is 2.02 times more volatile than Taiwan Steel Union. It trades about -0.13 of its potential returns per unit of risk. Taiwan Steel Union is currently generating about -0.28 per unit of risk. If you would invest 3,710 in Chung Hwa Chemical on September 1, 2024 and sell it today you would lose (285.00) from holding Chung Hwa Chemical or give up 7.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hwa Chemical vs. Taiwan Steel Union
Performance |
| Timeline |
| Chung Hwa Chemical |
| Taiwan Steel Union |
Chung Hwa and Taiwan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hwa and Taiwan Steel
The main advantage of trading using opposite Chung Hwa and Taiwan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, Taiwan Steel 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 Steel will offset losses from the drop in Taiwan Steel'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 |
| Taiwan Steel vs. Cleanaway Co | Taiwan Steel vs. Sunny Friend Environmental | Taiwan Steel vs. Topco Scientific Co | Taiwan Steel vs. Kung Long Batteries |
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 CEOs Directory module to screen CEOs from public companies around the world.
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