Correlation Between Chung Hwa and Sunko Ink
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Sunko Ink 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 Sunko Ink into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hwa Pulp and Sunko Ink Co, you can compare the effects of market volatilities on Chung Hwa and Sunko Ink 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 Sunko Ink. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Sunko Ink.
Diversification Opportunities for Chung Hwa and Sunko Ink
Poor diversification
The 3 months correlation between Chung and Sunko is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Pulp and Sunko Ink Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunko Ink 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 Pulp are associated (or correlated) with Sunko Ink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunko Ink has no effect on the direction of Chung Hwa i.e., Chung Hwa and Sunko Ink go up and down completely randomly.
Pair Corralation between Chung Hwa and Sunko Ink
Assuming the 90 days trading horizon Chung Hwa is expected to generate 1.61 times less return on investment than Sunko Ink. But when comparing it to its historical volatility, Chung Hwa Pulp is 1.17 times less risky than Sunko Ink. It trades about 0.02 of its potential returns per unit of risk. Sunko Ink Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,575 in Sunko Ink Co on September 4, 2024 and sell it today you would earn a total of 230.00 from holding Sunko Ink Co or generate 14.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hwa Pulp vs. Sunko Ink Co
Performance |
| Timeline |
| Chung Hwa Pulp |
| Sunko Ink |
Chung Hwa and Sunko Ink Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hwa and Sunko Ink
The main advantage of trading using opposite Chung Hwa and Sunko Ink positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, Sunko Ink 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 Sunko Ink will offset losses from the drop in Sunko Ink's long position.The idea behind Chung Hwa Pulp and Sunko Ink Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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