Correlation Between Ko Ja and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both Ko Ja and Chung Hwa 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 Ko Ja and Chung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ko Ja Cayman and Chung Hwa Chemical, you can compare the effects of market volatilities on Ko Ja and Chung Hwa 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 Ko Ja with a short position of Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ko Ja and Chung Hwa.
Diversification Opportunities for Ko Ja and Chung Hwa
Pay attention - limited upside
The 3 months correlation between 5215 and Chung is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Ko Ja Cayman and Chung Hwa Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Chemical and Ko Ja 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 Ko Ja Cayman are associated (or correlated) with Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Chemical has no effect on the direction of Ko Ja i.e., Ko Ja and Chung Hwa go up and down completely randomly.
Pair Corralation between Ko Ja and Chung Hwa
Assuming the 90 days trading horizon Ko Ja Cayman is expected to under-perform the Chung Hwa. But the stock apears to be less risky and, when comparing its historical volatility, Ko Ja Cayman is 1.29 times less risky than Chung Hwa. The stock trades about -0.26 of its potential returns per unit of risk. The Chung Hwa Chemical is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 2,890 in Chung Hwa Chemical on November 2, 2024 and sell it today you would lose (90.00) from holding Chung Hwa Chemical or give up 3.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ko Ja Cayman vs. Chung Hwa Chemical
Performance |
| Timeline |
| Ko Ja Cayman |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chung Hwa Chemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Ko Ja and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ko Ja and Chung Hwa
The main advantage of trading using opposite Ko Ja and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ko Ja position performs unexpectedly, Chung Hwa 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 Hwa will offset losses from the drop in Chung Hwa's long position.The idea behind Ko Ja Cayman and Chung Hwa 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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