Correlation Between Chunghwa Precision and Castles Technology
Can any of the company-specific risk be diversified away by investing in both Chunghwa Precision and Castles Technology 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 Chunghwa Precision and Castles Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chunghwa Precision Test and Castles Technology Co, you can compare the effects of market volatilities on Chunghwa Precision and Castles Technology 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 Chunghwa Precision with a short position of Castles Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Precision and Castles Technology.
Diversification Opportunities for Chunghwa Precision and Castles Technology
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Chunghwa and Castles is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Precision Test and Castles Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castles Technology and Chunghwa Precision 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 Chunghwa Precision Test are associated (or correlated) with Castles Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castles Technology has no effect on the direction of Chunghwa Precision i.e., Chunghwa Precision and Castles Technology go up and down completely randomly.
Pair Corralation between Chunghwa Precision and Castles Technology
Assuming the 90 days trading horizon Chunghwa Precision Test is expected to generate 0.86 times more return on investment than Castles Technology. However, Chunghwa Precision Test is 1.17 times less risky than Castles Technology. It trades about 0.05 of its potential returns per unit of risk. Castles Technology Co is currently generating about 0.03 per unit of risk. If you would invest 52,596 in Chunghwa Precision Test on October 13, 2024 and sell it today you would earn a total of 28,904 from holding Chunghwa Precision Test or generate 54.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Chunghwa Precision Test vs. Castles Technology Co
Performance |
| Timeline |
| Chunghwa Precision Test |
| Castles Technology |
Chunghwa Precision and Castles Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Precision and Castles Technology
The main advantage of trading using opposite Chunghwa Precision and Castles Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Precision position performs unexpectedly, Castles Technology 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 Castles Technology will offset losses from the drop in Castles Technology's long position.The idea behind Chunghwa Precision Test and Castles Technology Co 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.
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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