Correlation Between Cheng Shin and Everlight Chemical
Can any of the company-specific risk be diversified away by investing in both Cheng Shin and Everlight Chemical 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 Cheng Shin and Everlight Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheng Shin Rubber and Everlight Chemical Industrial, you can compare the effects of market volatilities on Cheng Shin and Everlight Chemical 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 Cheng Shin with a short position of Everlight Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Shin and Everlight Chemical.
Diversification Opportunities for Cheng Shin and Everlight Chemical
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Cheng and Everlight is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Everlight Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everlight Chemical and Cheng Shin 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 Cheng Shin Rubber are associated (or correlated) with Everlight Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everlight Chemical has no effect on the direction of Cheng Shin i.e., Cheng Shin and Everlight Chemical go up and down completely randomly.
Pair Corralation between Cheng Shin and Everlight Chemical
Assuming the 90 days trading horizon Cheng Shin Rubber is expected to generate 1.95 times more return on investment than Everlight Chemical. However, Cheng Shin is 1.95 times more volatile than Everlight Chemical Industrial. It trades about 0.16 of its potential returns per unit of risk. Everlight Chemical Industrial is currently generating about -0.24 per unit of risk. If you would invest 4,675 in Cheng Shin Rubber on August 26, 2024 and sell it today you would earn a total of 465.00 from holding Cheng Shin Rubber or generate 9.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheng Shin Rubber vs. Everlight Chemical Industrial
Performance |
| Timeline |
| Cheng Shin Rubber |
| Everlight Chemical |
Cheng Shin and Everlight Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheng Shin and Everlight Chemical
The main advantage of trading using opposite Cheng Shin and Everlight Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheng Shin position performs unexpectedly, Everlight Chemical 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 Everlight Chemical will offset losses from the drop in Everlight Chemical's long position.| Cheng Shin vs. Taiwan Semiconductor Manufacturing | Cheng Shin vs. Hon Hai Precision | Cheng Shin vs. MediaTek | Cheng Shin vs. Chunghwa Telecom Co |
| Everlight Chemical vs. Cheng Shin Rubber | Everlight Chemical vs. Taiwan Cement Corp | Everlight Chemical vs. China Steel Chemical | Everlight Chemical vs. Yulon Motor Co |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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