Correlation Between Cheng Shin and Chung Hwa

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Can any of the company-specific risk be diversified away by investing in both Cheng Shin and Chung Hwa 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 Chung Hwa 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 Chung Hwa Chemical, you can compare the effects of market volatilities on Cheng Shin and Chung Hwa 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 Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Shin and Chung Hwa.

Diversification Opportunities for Cheng Shin and Chung Hwa

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Cheng and Chung is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Chung Hwa Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa 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 Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Chemical has no effect on the direction of Cheng Shin i.e., Cheng Shin and Chung Hwa go up and down completely randomly.

Pair Corralation between Cheng Shin and Chung Hwa

Assuming the 90 days trading horizon Cheng Shin Rubber is expected to generate 1.26 times more return on investment than Chung Hwa. However, Cheng Shin is 1.26 times more volatile than Chung Hwa Chemical. It trades about 0.16 of its potential returns per unit of risk. Chung Hwa Chemical is currently generating about -0.22 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 Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Cheng Shin Rubber  vs.  Chung Hwa Chemical

 Performance 
       Timeline  
Cheng Shin Rubber 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Shin Rubber are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Cheng Shin is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Chung Hwa Chemical 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Chung Hwa Chemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chung Hwa may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Cheng Shin and Chung Hwa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cheng Shin and Chung Hwa

The main advantage of trading using opposite Cheng Shin and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheng Shin position performs unexpectedly, Chung Hwa 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 Chung Hwa will offset losses from the drop in Chung Hwa's long position.
The idea behind Cheng Shin Rubber and Chung Hwa Chemical 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.
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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