Correlation Between Chang Hwa and New Asia
Can any of the company-specific risk be diversified away by investing in both Chang Hwa and New Asia 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 Chang Hwa and New Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chang Hwa Commercial and New Asia Construction, you can compare the effects of market volatilities on Chang Hwa and New Asia 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 Chang Hwa with a short position of New Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chang Hwa and New Asia.
Diversification Opportunities for Chang Hwa and New Asia
Average diversification
The 3 months correlation between Chang and New is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Chang Hwa Commercial and New Asia Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Asia Construction and Chang Hwa 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 Chang Hwa Commercial are associated (or correlated) with New Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Asia Construction has no effect on the direction of Chang Hwa i.e., Chang Hwa and New Asia go up and down completely randomly.
Pair Corralation between Chang Hwa and New Asia
Assuming the 90 days trading horizon Chang Hwa Commercial is expected to under-perform the New Asia. But the stock apears to be less risky and, when comparing its historical volatility, Chang Hwa Commercial is 3.37 times less risky than New Asia. The stock trades about -0.05 of its potential returns per unit of risk. The New Asia Construction is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,200 in New Asia Construction on September 1, 2024 and sell it today you would earn a total of 135.00 from holding New Asia Construction or generate 11.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chang Hwa Commercial vs. New Asia Construction
Performance |
| Timeline |
| Chang Hwa Commercial |
| New Asia Construction |
Chang Hwa and New Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chang Hwa and New Asia
The main advantage of trading using opposite Chang Hwa and New Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chang Hwa position performs unexpectedly, New Asia 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 New Asia will offset losses from the drop in New Asia's long position.| Chang Hwa vs. Central Reinsurance Corp | Chang Hwa vs. Huaku Development Co | Chang Hwa vs. Fubon Financial Holding |
| New Asia vs. BES Engineering Co | New Asia vs. Continental Holdings Corp | New Asia vs. Kee Tai Properties | New Asia vs. Hung Sheng Construction |
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 Stocks Directory module to find actively traded stocks across global markets.
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