Correlation Between Arbor Technology and Chi Sheng
Can any of the company-specific risk be diversified away by investing in both Arbor Technology and Chi Sheng 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 Arbor Technology and Chi Sheng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arbor Technology and Chi Sheng Chemical, you can compare the effects of market volatilities on Arbor Technology and Chi Sheng 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 Arbor Technology with a short position of Chi Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Technology and Chi Sheng.
Diversification Opportunities for Arbor Technology and Chi Sheng
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Arbor and Chi is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Technology and Chi Sheng Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Sheng Chemical and Arbor Technology 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 Arbor Technology are associated (or correlated) with Chi Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Sheng Chemical has no effect on the direction of Arbor Technology i.e., Arbor Technology and Chi Sheng go up and down completely randomly.
Pair Corralation between Arbor Technology and Chi Sheng
Assuming the 90 days trading horizon Arbor Technology is expected to under-perform the Chi Sheng. In addition to that, Arbor Technology is 2.12 times more volatile than Chi Sheng Chemical. It trades about -0.35 of its total potential returns per unit of risk. Chi Sheng Chemical is currently generating about 0.11 per unit of volatility. If you would invest 2,810 in Chi Sheng Chemical on November 7, 2024 and sell it today you would earn a total of 55.00 from holding Chi Sheng Chemical or generate 1.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arbor Technology vs. Chi Sheng Chemical
Performance |
| Timeline |
| Arbor Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Chi Sheng Chemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Arbor Technology and Chi Sheng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arbor Technology and Chi Sheng
The main advantage of trading using opposite Arbor Technology and Chi Sheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbor Technology position performs unexpectedly, Chi Sheng 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 Chi Sheng will offset losses from the drop in Chi Sheng's long position.The idea behind Arbor Technology and Chi Sheng Chemical 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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