Correlation Between Chung Hwa and Tang Eng
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Tang Eng 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 Chung Hwa and Tang Eng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hwa Food and Tang Eng Iron, you can compare the effects of market volatilities on Chung Hwa and Tang Eng 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 Chung Hwa with a short position of Tang Eng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Tang Eng.
Diversification Opportunities for Chung Hwa and Tang Eng
Very poor diversification
The 3 months correlation between Chung and Tang is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Food and Tang Eng Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tang Eng Iron and Chung 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 Chung Hwa Food are associated (or correlated) with Tang Eng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tang Eng Iron has no effect on the direction of Chung Hwa i.e., Chung Hwa and Tang Eng go up and down completely randomly.
Pair Corralation between Chung Hwa and Tang Eng
Assuming the 90 days trading horizon Chung Hwa Food is expected to under-perform the Tang Eng. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hwa Food is 4.74 times less risky than Tang Eng. The stock trades about -0.23 of its potential returns per unit of risk. The Tang Eng Iron is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 3,155 in Tang Eng Iron on October 20, 2024 and sell it today you would lose (45.00) from holding Tang Eng Iron or give up 1.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hwa Food vs. Tang Eng Iron
Performance |
| Timeline |
| Chung Hwa Food |
| Tang Eng Iron |
Chung Hwa and Tang Eng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hwa and Tang Eng
The main advantage of trading using opposite Chung Hwa and Tang Eng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, Tang Eng 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 Tang Eng will offset losses from the drop in Tang Eng's long position.| Chung Hwa vs. Sea Sonic Electronics | Chung Hwa vs. Excellence Optoelectronic | Chung Hwa vs. Ablerex Electronics Co | Chung Hwa vs. Sporton International |
| Tang Eng vs. Chinese Maritime Transport | Tang Eng vs. Chien Kuo Construction | Tang Eng vs. Kedge Construction Co | Tang Eng vs. Shan Loong Transportation Co |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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