Correlation Between Pou Chen and Cheng Loong
Can any of the company-specific risk be diversified away by investing in both Pou Chen and Cheng Loong 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 Pou Chen and Cheng Loong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pou Chen Corp and Cheng Loong Corp, you can compare the effects of market volatilities on Pou Chen and Cheng Loong 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 Pou Chen with a short position of Cheng Loong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pou Chen and Cheng Loong.
Diversification Opportunities for Pou Chen and Cheng Loong
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Pou and Cheng is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pou Chen Corp and Cheng Loong Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Loong Corp and Pou Chen 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 Pou Chen Corp are associated (or correlated) with Cheng Loong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Loong Corp has no effect on the direction of Pou Chen i.e., Pou Chen and Cheng Loong go up and down completely randomly.
Pair Corralation between Pou Chen and Cheng Loong
Assuming the 90 days trading horizon Pou Chen Corp is expected to generate 1.55 times more return on investment than Cheng Loong. However, Pou Chen is 1.55 times more volatile than Cheng Loong Corp. It trades about 0.09 of its potential returns per unit of risk. Cheng Loong Corp is currently generating about -0.08 per unit of risk. If you would invest 2,925 in Pou Chen Corp on September 4, 2024 and sell it today you would earn a total of 1,375 from holding Pou Chen Corp or generate 47.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.65% |
| Values | Daily Returns |
Pou Chen Corp vs. Cheng Loong Corp
Performance |
| Timeline |
| Pou Chen Corp |
| Cheng Loong Corp |
Pou Chen and Cheng Loong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pou Chen and Cheng Loong
The main advantage of trading using opposite Pou Chen and Cheng Loong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pou Chen position performs unexpectedly, Cheng Loong 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 Loong will offset losses from the drop in Cheng Loong's long position.| Pou Chen vs. Uni President Enterprises Corp | Pou Chen vs. Cheng Shin Rubber | Pou Chen vs. Far Eastern New | Pou Chen vs. Formosa Chemicals Fibre |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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