Correlation Between Chun Yuan and Tang Eng
Can any of the company-specific risk be diversified away by investing in both Chun Yuan and Tang Eng 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 Chun Yuan and Tang Eng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chun Yuan Steel and Tang Eng Iron, you can compare the effects of market volatilities on Chun Yuan and Tang Eng 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 Chun Yuan with a short position of Tang Eng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chun Yuan and Tang Eng.
Diversification Opportunities for Chun Yuan and Tang Eng
Poor diversification
The 3 months correlation between Chun and Tang is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Chun Yuan Steel and Tang Eng Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tang Eng Iron and Chun Yuan 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 Chun Yuan Steel are associated (or correlated) with Tang Eng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tang Eng Iron has no effect on the direction of Chun Yuan i.e., Chun Yuan and Tang Eng go up and down completely randomly.
Pair Corralation between Chun Yuan and Tang Eng
Assuming the 90 days trading horizon Chun Yuan Steel is expected to generate 1.72 times more return on investment than Tang Eng. However, Chun Yuan is 1.72 times more volatile than Tang Eng Iron. It trades about 0.03 of its potential returns per unit of risk. Tang Eng Iron is currently generating about 0.02 per unit of risk. If you would invest 1,570 in Chun Yuan Steel on August 30, 2024 and sell it today you would earn a total of 285.00 from holding Chun Yuan Steel or generate 18.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chun Yuan Steel vs. Tang Eng Iron
Performance |
| Timeline |
| Chun Yuan Steel |
| Tang Eng Iron |
Chun Yuan and Tang Eng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chun Yuan and Tang Eng
The main advantage of trading using opposite Chun Yuan and Tang Eng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chun Yuan position performs unexpectedly, Tang Eng 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 Tang Eng will offset losses from the drop in Tang Eng's long position.| Chun Yuan vs. Hsin Kuang Steel | Chun Yuan vs. Chung Hung Steel | Chun Yuan vs. China Steel Structure | Chun Yuan vs. Feng Hsin Steel |
| Tang Eng vs. Goldsun Building Materials | Tang Eng vs. CKM Building Material | Tang Eng vs. Shih Kuen Plastics | Tang Eng vs. Taiwan Cooperative Financial |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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