Correlation Between Continental Holdings and Chung Hsin
Can any of the company-specific risk be diversified away by investing in both Continental Holdings and Chung Hsin 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 Continental Holdings and Chung Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Continental Holdings Corp and Chung Hsin Electric Machinery, you can compare the effects of market volatilities on Continental Holdings and Chung Hsin 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 Continental Holdings with a short position of Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental Holdings and Chung Hsin.
Diversification Opportunities for Continental Holdings and Chung Hsin
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Continental and Chung is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Continental Holdings Corp and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric and Continental Holdings 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 Continental Holdings Corp are associated (or correlated) with Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of Continental Holdings i.e., Continental Holdings and Chung Hsin go up and down completely randomly.
Pair Corralation between Continental Holdings and Chung Hsin
Assuming the 90 days trading horizon Continental Holdings is expected to generate 8.17 times less return on investment than Chung Hsin. But when comparing it to its historical volatility, Continental Holdings Corp is 1.7 times less risky than Chung Hsin. It trades about 0.02 of its potential returns per unit of risk. Chung Hsin Electric Machinery is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 7,320 in Chung Hsin Electric Machinery on August 31, 2024 and sell it today you would earn a total of 8,480 from holding Chung Hsin Electric Machinery or generate 115.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Continental Holdings Corp vs. Chung Hsin Electric Machinery
Performance |
| Timeline |
| Continental Holdings Corp |
| Chung Hsin Electric |
Continental Holdings and Chung Hsin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Continental Holdings and Chung Hsin
The main advantage of trading using opposite Continental Holdings and Chung Hsin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental Holdings position performs unexpectedly, Chung Hsin 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 Hsin will offset losses from the drop in Chung Hsin's long position.| Continental Holdings vs. BES Engineering Co | Continental Holdings vs. Kee Tai Properties | Continental Holdings vs. Hung Sheng Construction |
| Chung Hsin vs. BES Engineering Co | Chung Hsin vs. Continental Holdings Corp | Chung Hsin vs. Kee Tai Properties | Chung Hsin 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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