Correlation Between Hsin Kuang and Bin Chuan
Can any of the company-specific risk be diversified away by investing in both Hsin Kuang and Bin Chuan 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 Hsin Kuang and Bin Chuan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hsin Kuang Steel and Bin Chuan Enterprise, you can compare the effects of market volatilities on Hsin Kuang and Bin Chuan 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 Hsin Kuang with a short position of Bin Chuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsin Kuang and Bin Chuan.
Diversification Opportunities for Hsin Kuang and Bin Chuan
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hsin and Bin is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hsin Kuang Steel and Bin Chuan Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bin Chuan Enterprise and Hsin Kuang 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 Hsin Kuang Steel are associated (or correlated) with Bin Chuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bin Chuan Enterprise has no effect on the direction of Hsin Kuang i.e., Hsin Kuang and Bin Chuan go up and down completely randomly.
Pair Corralation between Hsin Kuang and Bin Chuan
Assuming the 90 days trading horizon Hsin Kuang is expected to generate 106.61 times less return on investment than Bin Chuan. But when comparing it to its historical volatility, Hsin Kuang Steel is 1.3 times less risky than Bin Chuan. It trades about 0.0 of its potential returns per unit of risk. Bin Chuan Enterprise is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,275 in Bin Chuan Enterprise on September 2, 2024 and sell it today you would earn a total of 4,215 from holding Bin Chuan Enterprise or generate 185.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hsin Kuang Steel vs. Bin Chuan Enterprise
Performance |
| Timeline |
| Hsin Kuang Steel |
| Bin Chuan Enterprise |
Hsin Kuang and Bin Chuan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hsin Kuang and Bin Chuan
The main advantage of trading using opposite Hsin Kuang and Bin Chuan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hsin Kuang position performs unexpectedly, Bin Chuan 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 Bin Chuan will offset losses from the drop in Bin Chuan's long position.| Hsin Kuang vs. Chung Hung Steel | Hsin Kuang vs. Tung Ho Steel | Hsin Kuang vs. Ta Chen Stainless | Hsin Kuang vs. Feng Hsin Steel |
| Bin Chuan vs. Posiflex Technology | Bin Chuan vs. Microelectronics Technology | Bin Chuan vs. Voltronic Power Technology | Bin Chuan vs. HOYA Resort Hotel |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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