Correlation Between Chih Lien and Chia Ta
Can any of the company-specific risk be diversified away by investing in both Chih Lien and Chia Ta 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 Chih Lien and Chia Ta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chih Lien Industrial and Chia Ta World, you can compare the effects of market volatilities on Chih Lien and Chia Ta 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 Chih Lien with a short position of Chia Ta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chih Lien and Chia Ta.
Diversification Opportunities for Chih Lien and Chia Ta
Excellent diversification
The 3 months correlation between Chih and Chia is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Chih Lien Industrial and Chia Ta World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Ta World and Chih Lien 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 Chih Lien Industrial are associated (or correlated) with Chia Ta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Ta World has no effect on the direction of Chih Lien i.e., Chih Lien and Chia Ta go up and down completely randomly.
Pair Corralation between Chih Lien and Chia Ta
Assuming the 90 days trading horizon Chih Lien is expected to generate 10.56 times less return on investment than Chia Ta. But when comparing it to its historical volatility, Chih Lien Industrial is 1.36 times less risky than Chia Ta. It trades about 0.01 of its potential returns per unit of risk. Chia Ta World is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,660 in Chia Ta World on August 28, 2024 and sell it today you would earn a total of 715.00 from holding Chia Ta World or generate 43.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chih Lien Industrial vs. Chia Ta World
Performance |
| Timeline |
| Chih Lien Industrial |
| Chia Ta World |
Chih Lien and Chia Ta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chih Lien and Chia Ta
The main advantage of trading using opposite Chih Lien and Chia Ta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chih Lien position performs unexpectedly, Chia Ta 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 Chia Ta will offset losses from the drop in Chia Ta's long position.The idea behind Chih Lien Industrial and Chia Ta World 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.| Chia Ta vs. Chun Yuan Steel | Chia Ta vs. Chun Yu Works | Chia Ta vs. China Steel Structure | Chia Ta vs. Chih Lien Industrial |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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