Correlation Between Chung Hung and Chain Chon
Can any of the company-specific risk be diversified away by investing in both Chung Hung and Chain Chon 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 Chain Chon 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 Chain Chon Industrial, you can compare the effects of market volatilities on Chung Hung and Chain Chon 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 Chain Chon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hung and Chain Chon.
Diversification Opportunities for Chung Hung and Chain Chon
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chung and Chain is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel and Chain Chon Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chain Chon Industrial 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 Chain Chon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chain Chon Industrial has no effect on the direction of Chung Hung i.e., Chung Hung and Chain Chon go up and down completely randomly.
Pair Corralation between Chung Hung and Chain Chon
Assuming the 90 days trading horizon Chung Hung Steel is expected to generate 0.73 times more return on investment than Chain Chon. However, Chung Hung Steel is 1.38 times less risky than Chain Chon. It trades about 0.03 of its potential returns per unit of risk. Chain Chon Industrial is currently generating about -0.25 per unit of risk. If you would invest 2,085 in Chung Hung Steel on August 28, 2024 and sell it today you would earn a total of 15.00 from holding Chung Hung Steel or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hung Steel vs. Chain Chon Industrial
Performance |
| Timeline |
| Chung Hung Steel |
| Chain Chon Industrial |
Chung Hung and Chain Chon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hung and Chain Chon
The main advantage of trading using opposite Chung Hung and Chain Chon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hung position performs unexpectedly, Chain Chon 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 Chain Chon will offset losses from the drop in Chain Chon's long position.The idea behind Chung Hung Steel and Chain Chon Industrial 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.| Chain Chon vs. China Steel Corp | Chain Chon vs. Chung Hung Steel | Chain Chon vs. Tung Ho Steel | Chain Chon vs. Feng Hsin Steel |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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