Correlation Between Chunghwa Chemical and Lu Hai
Can any of the company-specific risk be diversified away by investing in both Chunghwa Chemical and Lu Hai 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 Chunghwa Chemical and Lu Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chunghwa Chemical Synthesis and Lu Hai Holding, you can compare the effects of market volatilities on Chunghwa Chemical and Lu Hai 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 Chunghwa Chemical with a short position of Lu Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Chemical and Lu Hai.
Diversification Opportunities for Chunghwa Chemical and Lu Hai
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chunghwa and 2115 is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Chemical Synthesis and Lu Hai Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lu Hai Holding and Chunghwa Chemical 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 Chunghwa Chemical Synthesis are associated (or correlated) with Lu Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lu Hai Holding has no effect on the direction of Chunghwa Chemical i.e., Chunghwa Chemical and Lu Hai go up and down completely randomly.
Pair Corralation between Chunghwa Chemical and Lu Hai
Assuming the 90 days trading horizon Chunghwa Chemical Synthesis is expected to under-perform the Lu Hai. In addition to that, Chunghwa Chemical is 1.49 times more volatile than Lu Hai Holding. It trades about -0.35 of its total potential returns per unit of risk. Lu Hai Holding is currently generating about -0.11 per unit of volatility. If you would invest 3,180 in Lu Hai Holding on September 2, 2024 and sell it today you would lose (75.00) from holding Lu Hai Holding or give up 2.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chunghwa Chemical Synthesis vs. Lu Hai Holding
Performance |
| Timeline |
| Chunghwa Chemical |
| Lu Hai Holding |
Chunghwa Chemical and Lu Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Chemical and Lu Hai
The main advantage of trading using opposite Chunghwa Chemical and Lu Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Chemical position performs unexpectedly, Lu Hai 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 Lu Hai will offset losses from the drop in Lu Hai's long position.| Chunghwa Chemical vs. Taiwan Semiconductor Manufacturing | Chunghwa Chemical vs. Hon Hai Precision | Chunghwa Chemical vs. MediaTek | Chunghwa Chemical vs. Chunghwa Telecom Co |
| Lu Hai vs. Hota Industrial Mfg | Lu Hai vs. BizLink Holding | Lu Hai vs. Cub Elecparts | Lu Hai vs. Hu Lane Associate |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |