Correlation Between Cheng Shin and Pontex Polyblend
Can any of the company-specific risk be diversified away by investing in both Cheng Shin and Pontex Polyblend 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 Pontex Polyblend 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 Pontex Polyblend CoLtd, you can compare the effects of market volatilities on Cheng Shin and Pontex Polyblend 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 Pontex Polyblend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Shin and Pontex Polyblend.
Diversification Opportunities for Cheng Shin and Pontex Polyblend
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cheng and Pontex is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Pontex Polyblend CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pontex Polyblend CoLtd 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 Pontex Polyblend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pontex Polyblend CoLtd has no effect on the direction of Cheng Shin i.e., Cheng Shin and Pontex Polyblend go up and down completely randomly.
Pair Corralation between Cheng Shin and Pontex Polyblend
Assuming the 90 days trading horizon Cheng Shin Rubber is expected to under-perform the Pontex Polyblend. But the stock apears to be less risky and, when comparing its historical volatility, Cheng Shin Rubber is 1.51 times less risky than Pontex Polyblend. The stock trades about -0.04 of its potential returns per unit of risk. The Pontex Polyblend CoLtd is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,210 in Pontex Polyblend CoLtd on November 5, 2024 and sell it today you would earn a total of 80.00 from holding Pontex Polyblend CoLtd or generate 3.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheng Shin Rubber vs. Pontex Polyblend CoLtd
Performance |
| Timeline |
| Cheng Shin Rubber |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Pontex Polyblend CoLtd |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Cheng Shin and Pontex Polyblend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheng Shin and Pontex Polyblend
The main advantage of trading using opposite Cheng Shin and Pontex Polyblend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheng Shin position performs unexpectedly, Pontex Polyblend 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 Pontex Polyblend will offset losses from the drop in Pontex Polyblend's long position.The idea behind Cheng Shin Rubber and Pontex Polyblend CoLtd 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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