Correlation Between Hsinli Chemical and Taiwan Chinsan
Can any of the company-specific risk be diversified away by investing in both Hsinli Chemical and Taiwan Chinsan 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 Hsinli Chemical and Taiwan Chinsan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hsinli Chemical Industrial and Taiwan Chinsan Electronic, you can compare the effects of market volatilities on Hsinli Chemical and Taiwan Chinsan 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 Hsinli Chemical with a short position of Taiwan Chinsan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsinli Chemical and Taiwan Chinsan.
Diversification Opportunities for Hsinli Chemical and Taiwan Chinsan
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hsinli and Taiwan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hsinli Chemical Industrial and Taiwan Chinsan Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Chinsan Electronic and Hsinli Chemical 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 Hsinli Chemical Industrial are associated (or correlated) with Taiwan Chinsan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Chinsan Electronic has no effect on the direction of Hsinli Chemical i.e., Hsinli Chemical and Taiwan Chinsan go up and down completely randomly.
Pair Corralation between Hsinli Chemical and Taiwan Chinsan
Assuming the 90 days trading horizon Hsinli Chemical is expected to generate 8.63 times less return on investment than Taiwan Chinsan. But when comparing it to its historical volatility, Hsinli Chemical Industrial is 1.53 times less risky than Taiwan Chinsan. It trades about 0.04 of its potential returns per unit of risk. Taiwan Chinsan Electronic is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,455 in Taiwan Chinsan Electronic on September 13, 2024 and sell it today you would earn a total of 1,115 from holding Taiwan Chinsan Electronic or generate 32.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hsinli Chemical Industrial vs. Taiwan Chinsan Electronic
Performance |
| Timeline |
| Hsinli Chemical Indu |
| Taiwan Chinsan Electronic |
Hsinli Chemical and Taiwan Chinsan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hsinli Chemical and Taiwan Chinsan
The main advantage of trading using opposite Hsinli Chemical and Taiwan Chinsan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hsinli Chemical position performs unexpectedly, Taiwan Chinsan 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 Taiwan Chinsan will offset losses from the drop in Taiwan Chinsan's long position.| Hsinli Chemical vs. Feng Tay Enterprises | Hsinli Chemical vs. Pou Chen Corp | Hsinli Chemical vs. Fulgent Sun International | Hsinli Chemical vs. Shui Mu International Co |
| Taiwan Chinsan vs. ANJI Technology Co | Taiwan Chinsan vs. Emerging Display Technologies | Taiwan Chinsan vs. U Tech Media Corp | Taiwan Chinsan vs. Ruentex Development 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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