Correlation Between Cheng Uei and Kinpo Electronics
Can any of the company-specific risk be diversified away by investing in both Cheng Uei and Kinpo Electronics 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 Uei and Kinpo Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheng Uei Precision and Kinpo Electronics, you can compare the effects of market volatilities on Cheng Uei and Kinpo Electronics 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 Uei with a short position of Kinpo Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Uei and Kinpo Electronics.
Diversification Opportunities for Cheng Uei and Kinpo Electronics
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cheng and Kinpo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Uei Precision and Kinpo Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinpo Electronics and Cheng Uei 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 Uei Precision are associated (or correlated) with Kinpo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinpo Electronics has no effect on the direction of Cheng Uei i.e., Cheng Uei and Kinpo Electronics go up and down completely randomly.
Pair Corralation between Cheng Uei and Kinpo Electronics
Assuming the 90 days trading horizon Cheng Uei Precision is expected to under-perform the Kinpo Electronics. In addition to that, Cheng Uei is 1.09 times more volatile than Kinpo Electronics. It trades about -0.15 of its total potential returns per unit of risk. Kinpo Electronics is currently generating about -0.06 per unit of volatility. If you would invest 2,540 in Kinpo Electronics on November 5, 2024 and sell it today you would lose (40.00) from holding Kinpo Electronics or give up 1.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheng Uei Precision vs. Kinpo Electronics
Performance |
| Timeline |
| Cheng Uei Precision |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Kinpo Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cheng Uei and Kinpo Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheng Uei and Kinpo Electronics
The main advantage of trading using opposite Cheng Uei and Kinpo Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheng Uei position performs unexpectedly, Kinpo Electronics 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 Kinpo Electronics will offset losses from the drop in Kinpo Electronics' long position.The idea behind Cheng Uei Precision and Kinpo Electronics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |