Correlation Between Merry Electronics and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both Merry Electronics and Chung Hwa 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 Merry Electronics and Chung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merry Electronics Co and Chung Hwa Food, you can compare the effects of market volatilities on Merry Electronics and Chung Hwa 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 Merry Electronics with a short position of Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merry Electronics and Chung Hwa.
Diversification Opportunities for Merry Electronics and Chung Hwa
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Merry and Chung is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Merry Electronics Co and Chung Hwa Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Food and Merry Electronics 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 Merry Electronics Co are associated (or correlated) with Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Food has no effect on the direction of Merry Electronics i.e., Merry Electronics and Chung Hwa go up and down completely randomly.
Pair Corralation between Merry Electronics and Chung Hwa
Assuming the 90 days trading horizon Merry Electronics Co is expected to under-perform the Chung Hwa. In addition to that, Merry Electronics is 4.43 times more volatile than Chung Hwa Food. It trades about -0.05 of its total potential returns per unit of risk. Chung Hwa Food is currently generating about -0.06 per unit of volatility. If you would invest 9,198 in Chung Hwa Food on September 1, 2024 and sell it today you would lose (398.00) from holding Chung Hwa Food or give up 4.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.22% |
| Values | Daily Returns |
Merry Electronics Co vs. Chung Hwa Food
Performance |
| Timeline |
| Merry Electronics |
| Chung Hwa Food |
Merry Electronics and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merry Electronics and Chung Hwa
The main advantage of trading using opposite Merry Electronics and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merry Electronics position performs unexpectedly, Chung Hwa 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 Chung Hwa will offset losses from the drop in Chung Hwa's long position.The idea behind Merry Electronics Co and Chung Hwa Food 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.| Chung Hwa vs. Uni President Enterprises Corp | Chung Hwa vs. Tingyi Holding Corp | Chung Hwa vs. Lien Hwa Industrial | Chung Hwa vs. Great Wall Enterprise |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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