Correlation Between CHO Pharma and Cheng Mei
Can any of the company-specific risk be diversified away by investing in both CHO Pharma and Cheng Mei 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 CHO Pharma and Cheng Mei into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHO Pharma and Cheng Mei Materials, you can compare the effects of market volatilities on CHO Pharma and Cheng Mei 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 CHO Pharma with a short position of Cheng Mei. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHO Pharma and Cheng Mei.
Diversification Opportunities for CHO Pharma and Cheng Mei
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHO and Cheng is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CHO Pharma and Cheng Mei Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Mei Materials and CHO Pharma 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 CHO Pharma are associated (or correlated) with Cheng Mei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Mei Materials has no effect on the direction of CHO Pharma i.e., CHO Pharma and Cheng Mei go up and down completely randomly.
Pair Corralation between CHO Pharma and Cheng Mei
Assuming the 90 days trading horizon CHO Pharma is expected to generate 1.23 times less return on investment than Cheng Mei. In addition to that, CHO Pharma is 1.24 times more volatile than Cheng Mei Materials. It trades about 0.01 of its total potential returns per unit of risk. Cheng Mei Materials is currently generating about 0.02 per unit of volatility. If you would invest 1,320 in Cheng Mei Materials on December 4, 2024 and sell it today you would earn a total of 55.00 from holding Cheng Mei Materials or generate 4.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.59% |
| Values | Daily Returns |
CHO Pharma vs. Cheng Mei Materials
Performance |
| Timeline |
| CHO Pharma |
| Cheng Mei Materials |
CHO Pharma and Cheng Mei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHO Pharma and Cheng Mei
The main advantage of trading using opposite CHO Pharma and Cheng Mei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHO Pharma position performs unexpectedly, Cheng Mei 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 Cheng Mei will offset losses from the drop in Cheng Mei's long position.| CHO Pharma vs. Taiwan Speciality Chemicals | CHO Pharma vs. Sporton International | CHO Pharma vs. Feng Ching Metal | CHO Pharma vs. WinMate Communication INC |
| Cheng Mei vs. I Hwa Industrial Co | Cheng Mei vs. HOYA Resort Hotel | Cheng Mei vs. Landis Taipei Hotel | Cheng Mei vs. Mosa Industrial Corp |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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