Correlation Between Chung Lien and TMP Steel
Can any of the company-specific risk be diversified away by investing in both Chung Lien and TMP Steel 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 Lien and TMP Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Lien Transportation and TMP Steel, you can compare the effects of market volatilities on Chung Lien and TMP Steel 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 Lien with a short position of TMP Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Lien and TMP Steel.
Diversification Opportunities for Chung Lien and TMP Steel
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chung and TMP is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chung Lien Transportation and TMP Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMP Steel and Chung Lien 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 Lien Transportation are associated (or correlated) with TMP Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMP Steel has no effect on the direction of Chung Lien i.e., Chung Lien and TMP Steel go up and down completely randomly.
Pair Corralation between Chung Lien and TMP Steel
Assuming the 90 days trading horizon Chung Lien Transportation is expected to generate 0.47 times more return on investment than TMP Steel. However, Chung Lien Transportation is 2.11 times less risky than TMP Steel. It trades about 0.05 of its potential returns per unit of risk. TMP Steel is currently generating about -0.04 per unit of risk. If you would invest 4,215 in Chung Lien Transportation on September 3, 2024 and sell it today you would earn a total of 20.00 from holding Chung Lien Transportation or generate 0.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Lien Transportation vs. TMP Steel
Performance |
| Timeline |
| Chung Lien Transportation |
| TMP Steel |
Chung Lien and TMP Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Lien and TMP Steel
The main advantage of trading using opposite Chung Lien and TMP Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Lien position performs unexpectedly, TMP Steel 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 TMP Steel will offset losses from the drop in TMP Steel's long position.| Chung Lien vs. Kerry TJ Logistics | Chung Lien vs. Shan Loong Transportation Co | Chung Lien vs. YuantaP shares Taiwan Top | Chung Lien vs. YuantaP shares Taiwan Electronics |
| TMP Steel vs. Thunder Tiger Corp | TMP Steel vs. Synmosa Biopharma | TMP Steel vs. Oriental Union Chemical | TMP Steel 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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