Correlation Between Cheng Shin and Chung Hwa
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 Period | 3 Months [change] |
Direction | Flat |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Cheng Shin Rubber vs. Chung Hwa Chemical
Performance |
Timeline |
Cheng Shin Rubber |
Chung Hwa Chemical |
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.Cheng Shin vs. Taiwan Semiconductor Manufacturing | Cheng Shin vs. Hon Hai Precision | Cheng Shin vs. MediaTek | Cheng Shin vs. Chunghwa Telecom Co |
Chung Hwa vs. Cheng Shin Rubber | Chung Hwa vs. Taiwan Cement Corp | Chung Hwa vs. China Steel Chemical | Chung Hwa 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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