Correlation Between Chung Hung and Feng Hsin
Can any of the company-specific risk be diversified away by investing in both Chung Hung and Feng Hsin 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 Hung and Feng Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hung Steel and Feng Hsin Steel, you can compare the effects of market volatilities on Chung Hung and Feng Hsin 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 Hung with a short position of Feng Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hung and Feng Hsin.
Diversification Opportunities for Chung Hung and Feng Hsin
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Chung and Feng is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel and Feng Hsin Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Feng Hsin Steel and Chung Hung 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 Hung Steel are associated (or correlated) with Feng Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Feng Hsin Steel has no effect on the direction of Chung Hung i.e., Chung Hung and Feng Hsin go up and down completely randomly.
Pair Corralation between Chung Hung and Feng Hsin
Assuming the 90 days trading horizon Chung Hung Steel is not expected to generate positive returns. Moreover, Chung Hung is 1.29 times more volatile than Feng Hsin Steel. It trades away all of its potential returns to assume current level of volatility. Feng Hsin Steel is currently generating about -0.23 per unit of risk. If you would invest 2,085 in Chung Hung Steel on August 29, 2024 and sell it today you would lose (10.00) from holding Chung Hung Steel or give up 0.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hung Steel vs. Feng Hsin Steel
Performance |
| Timeline |
| Chung Hung Steel |
| Feng Hsin Steel |
Chung Hung and Feng Hsin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hung and Feng Hsin
The main advantage of trading using opposite Chung Hung and Feng Hsin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hung position performs unexpectedly, Feng Hsin 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 Feng Hsin will offset losses from the drop in Feng Hsin's long position.The idea behind Chung Hung Steel and Feng Hsin Steel 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.| Feng Hsin vs. Tung Ho Steel | Feng Hsin vs. U Ming Marine Transport | Feng Hsin vs. TSRC Corp | Feng Hsin vs. Cheng Shin Rubber |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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