Correlation Between Federal Corp and Cheng Shin
Can any of the company-specific risk be diversified away by investing in both Federal Corp and Cheng Shin 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 Federal Corp and Cheng Shin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Corp and Cheng Shin Rubber, you can compare the effects of market volatilities on Federal Corp and Cheng Shin 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 Federal Corp with a short position of Cheng Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Corp and Cheng Shin.
Diversification Opportunities for Federal Corp and Cheng Shin
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Federal and Cheng is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Federal Corp and Cheng Shin Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Shin Rubber and Federal Corp 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 Federal Corp are associated (or correlated) with Cheng Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Shin Rubber has no effect on the direction of Federal Corp i.e., Federal Corp and Cheng Shin go up and down completely randomly.
Pair Corralation between Federal Corp and Cheng Shin
Assuming the 90 days trading horizon Federal Corp is expected to generate 4.72 times less return on investment than Cheng Shin. But when comparing it to its historical volatility, Federal Corp is 1.12 times less risky than Cheng Shin. It trades about 0.01 of its potential returns per unit of risk. Cheng Shin Rubber is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,410 in Cheng Shin Rubber on September 3, 2024 and sell it today you would earn a total of 1,650 from holding Cheng Shin Rubber or generate 48.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Corp vs. Cheng Shin Rubber
Performance |
| Timeline |
| Federal Corp |
| Cheng Shin Rubber |
Federal Corp and Cheng Shin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Corp and Cheng Shin
The main advantage of trading using opposite Federal Corp and Cheng Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Corp position performs unexpectedly, Cheng Shin 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 Cheng Shin will offset losses from the drop in Cheng Shin's long position.| Federal Corp vs. Tainan Spinning Co | Federal Corp vs. Chia Her Industrial | Federal Corp vs. WiseChip Semiconductor | Federal Corp vs. Novatek Microelectronics Corp |
| Cheng Shin vs. Uni President Enterprises Corp | Cheng Shin vs. Formosa Chemicals Fibre | Cheng Shin vs. Asia Cement Corp | Cheng Shin vs. Pou Chen Corp |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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