Correlation Between D Link and Cheng Uei
Can any of the company-specific risk be diversified away by investing in both D Link and Cheng Uei 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 D Link and Cheng Uei into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between D Link Corp and Cheng Uei Precision, you can compare the effects of market volatilities on D Link and Cheng Uei 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 D Link with a short position of Cheng Uei. Check out your portfolio center. Please also check ongoing floating volatility patterns of D Link and Cheng Uei.
Diversification Opportunities for D Link and Cheng Uei
Very weak diversification
The 3 months correlation between 2332 and Cheng is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding D Link Corp and Cheng Uei Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Uei Precision and D Link 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 D Link Corp are associated (or correlated) with Cheng Uei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Uei Precision has no effect on the direction of D Link i.e., D Link and Cheng Uei go up and down completely randomly.
Pair Corralation between D Link and Cheng Uei
Assuming the 90 days trading horizon D Link is expected to generate 2.17 times less return on investment than Cheng Uei. But when comparing it to its historical volatility, D Link Corp is 1.51 times less risky than Cheng Uei. It trades about 0.15 of its potential returns per unit of risk. Cheng Uei Precision is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 6,580 in Cheng Uei Precision on August 28, 2024 and sell it today you would earn a total of 2,200 from holding Cheng Uei Precision or generate 33.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
D Link Corp vs. Cheng Uei Precision
Performance |
| Timeline |
| D Link Corp |
| Cheng Uei Precision |
D Link and Cheng Uei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with D Link and Cheng Uei
The main advantage of trading using opposite D Link and Cheng Uei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if D Link position performs unexpectedly, Cheng Uei 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 Cheng Uei will offset losses from the drop in Cheng Uei's long position.The idea behind D Link Corp and Cheng Uei Precision 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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