Correlation Between Wonderful and Chi Sheng
Can any of the company-specific risk be diversified away by investing in both Wonderful and Chi Sheng 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 Wonderful and Chi Sheng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wonderful Hi Tech Co and Chi Sheng Chemical, you can compare the effects of market volatilities on Wonderful and Chi Sheng 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 Wonderful with a short position of Chi Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wonderful and Chi Sheng.
Diversification Opportunities for Wonderful and Chi Sheng
Excellent diversification
The 3 months correlation between Wonderful and Chi is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Wonderful Hi Tech Co and Chi Sheng Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Sheng Chemical and Wonderful 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 Wonderful Hi Tech Co are associated (or correlated) with Chi Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Sheng Chemical has no effect on the direction of Wonderful i.e., Wonderful and Chi Sheng go up and down completely randomly.
Pair Corralation between Wonderful and Chi Sheng
Assuming the 90 days trading horizon Wonderful Hi Tech Co is expected to under-perform the Chi Sheng. In addition to that, Wonderful is 1.93 times more volatile than Chi Sheng Chemical. It trades about -0.09 of its total potential returns per unit of risk. Chi Sheng Chemical is currently generating about 0.16 per unit of volatility. If you would invest 2,810 in Chi Sheng Chemical on November 7, 2024 and sell it today you would earn a total of 80.00 from holding Chi Sheng Chemical or generate 2.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wonderful Hi Tech Co vs. Chi Sheng Chemical
Performance |
| Timeline |
| Wonderful Hi Tech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chi Sheng Chemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Wonderful and Chi Sheng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wonderful and Chi Sheng
The main advantage of trading using opposite Wonderful and Chi Sheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wonderful position performs unexpectedly, Chi Sheng 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 Chi Sheng will offset losses from the drop in Chi Sheng's long position.The idea behind Wonderful Hi Tech Co and Chi Sheng 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 Stocks Directory module to find actively traded stocks across global markets.
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