Correlation Between Mercuries Life and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both Mercuries Life 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 Mercuries Life and Chung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercuries Life Insurance and Chung Hwa Food, you can compare the effects of market volatilities on Mercuries Life 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 Mercuries Life with a short position of Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercuries Life and Chung Hwa.
Diversification Opportunities for Mercuries Life and Chung Hwa
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mercuries and Chung is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Mercuries Life Insurance 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 Mercuries Life 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 Mercuries Life Insurance 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 Mercuries Life i.e., Mercuries Life and Chung Hwa go up and down completely randomly.
Pair Corralation between Mercuries Life and Chung Hwa
Assuming the 90 days trading horizon Mercuries Life Insurance is expected to under-perform the Chung Hwa. In addition to that, Mercuries Life is 4.88 times more volatile than Chung Hwa Food. It trades about -0.14 of its total potential returns per unit of risk. Chung Hwa Food is currently generating about 0.08 per unit of volatility. If you would invest 8,850 in Chung Hwa Food on August 30, 2024 and sell it today you would earn a total of 40.00 from holding Chung Hwa Food or generate 0.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercuries Life Insurance vs. Chung Hwa Food
Performance |
| Timeline |
| Mercuries Life Insurance |
| Chung Hwa Food |
Mercuries Life and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercuries Life and Chung Hwa
The main advantage of trading using opposite Mercuries Life and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercuries Life 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.| Mercuries Life vs. Taiwan Secom Co | Mercuries Life vs. TTET Union Corp | Mercuries Life vs. China Steel Chemical | Mercuries Life vs. Taiwan Shin Kong |
| 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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