Correlation Between Cheng Shin and Federal Corp
Can any of the company-specific risk be diversified away by investing in both Cheng Shin and Federal Corp 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 Federal Corp 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 Federal Corp, you can compare the effects of market volatilities on Cheng Shin and Federal Corp 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 Federal Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Shin and Federal Corp.
Diversification Opportunities for Cheng Shin and Federal Corp
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cheng and Federal is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Federal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Corp 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 Federal Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Corp has no effect on the direction of Cheng Shin i.e., Cheng Shin and Federal Corp go up and down completely randomly.
Pair Corralation between Cheng Shin and Federal Corp
Assuming the 90 days trading horizon Cheng Shin Rubber is expected to generate 0.71 times more return on investment than Federal Corp. However, Cheng Shin Rubber is 1.4 times less risky than Federal Corp. It trades about 0.09 of its potential returns per unit of risk. Federal Corp is currently generating about -0.24 per unit of risk. If you would invest 4,995 in Cheng Shin Rubber on November 7, 2024 and sell it today you would earn a total of 75.00 from holding Cheng Shin Rubber or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheng Shin Rubber vs. Federal Corp
Performance |
| Timeline |
| Cheng Shin Rubber |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Federal Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cheng Shin and Federal Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheng Shin and Federal Corp
The main advantage of trading using opposite Cheng Shin and Federal Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheng Shin position performs unexpectedly, Federal Corp 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 Federal Corp will offset losses from the drop in Federal Corp's long position.The idea behind Cheng Shin Rubber and Federal Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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