Correlation Between Chung Hwa and Allied Industrial
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Allied Industrial 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 Allied Industrial 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 Allied Industrial, you can compare the effects of market volatilities on Chung Hwa and Allied Industrial 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 Allied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Allied Industrial.
Diversification Opportunities for Chung Hwa and Allied Industrial
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Chung and Allied is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Food and Allied Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Industrial 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 Allied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Industrial has no effect on the direction of Chung Hwa i.e., Chung Hwa and Allied Industrial go up and down completely randomly.
Pair Corralation between Chung Hwa and Allied Industrial
Assuming the 90 days trading horizon Chung Hwa Food is expected to under-perform the Allied Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hwa Food is 2.49 times less risky than Allied Industrial. The stock trades about -0.03 of its potential returns per unit of risk. The Allied Industrial is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,310 in Allied Industrial on September 3, 2024 and sell it today you would lose (40.00) from holding Allied Industrial or give up 3.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hwa Food vs. Allied Industrial
Performance |
| Timeline |
| Chung Hwa Food |
| Allied Industrial |
Chung Hwa and Allied Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hwa and Allied Industrial
The main advantage of trading using opposite Chung Hwa and Allied Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, Allied Industrial 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 Allied Industrial will offset losses from the drop in Allied Industrial's long position.| Chung Hwa vs. Uni President Enterprises Corp | Chung Hwa vs. Lien Hwa Industrial | Chung Hwa vs. Great Wall Enterprise | Chung Hwa vs. Standard Foods Corp |
| Allied Industrial vs. Delta Electronics | Allied Industrial vs. China Steel Chemical | Allied Industrial vs. WiseChip Semiconductor | Allied Industrial vs. Novatek Microelectronics Corp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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