Correlation Between Cheng Shin and Ta Chen
Can any of the company-specific risk be diversified away by investing in both Cheng Shin and Ta Chen 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 Ta Chen 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 Ta Chen Stainless, you can compare the effects of market volatilities on Cheng Shin and Ta Chen 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 Ta Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Shin and Ta Chen.
Diversification Opportunities for Cheng Shin and Ta Chen
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cheng and 2027 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Ta Chen Stainless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ta Chen Stainless 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 Ta Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ta Chen Stainless has no effect on the direction of Cheng Shin i.e., Cheng Shin and Ta Chen go up and down completely randomly.
Pair Corralation between Cheng Shin and Ta Chen
Assuming the 90 days trading horizon Cheng Shin Rubber is expected to generate 1.31 times more return on investment than Ta Chen. However, Cheng Shin is 1.31 times more volatile than Ta Chen Stainless. It trades about 0.13 of its potential returns per unit of risk. Ta Chen Stainless is currently generating about 0.11 per unit of risk. If you would invest 4,640 in Cheng Shin Rubber on August 28, 2024 and sell it today you would earn a total of 380.00 from holding Cheng Shin Rubber or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheng Shin Rubber vs. Ta Chen Stainless
Performance |
| Timeline |
| Cheng Shin Rubber |
| Ta Chen Stainless |
Cheng Shin and Ta Chen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheng Shin and Ta Chen
The main advantage of trading using opposite Cheng Shin and Ta Chen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheng Shin position performs unexpectedly, Ta Chen 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 Ta Chen will offset losses from the drop in Ta Chen'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 |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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