Correlation Between Ton Yi and Cheng Shin
Can any of the company-specific risk be diversified away by investing in both Ton Yi and Cheng Shin 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 Ton Yi and Cheng Shin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ton Yi Industrial and Cheng Shin Rubber, you can compare the effects of market volatilities on Ton Yi and Cheng Shin 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 Ton Yi with a short position of Cheng Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ton Yi and Cheng Shin.
Diversification Opportunities for Ton Yi and Cheng Shin
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ton and Cheng is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ton Yi Industrial and Cheng Shin Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Shin Rubber and Ton Yi 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 Ton Yi Industrial are associated (or correlated) with Cheng Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Shin Rubber has no effect on the direction of Ton Yi i.e., Ton Yi and Cheng Shin go up and down completely randomly.
Pair Corralation between Ton Yi and Cheng Shin
Assuming the 90 days trading horizon Ton Yi Industrial is expected to under-perform the Cheng Shin. But the stock apears to be less risky and, when comparing its historical volatility, Ton Yi Industrial is 1.76 times less risky than Cheng Shin. The stock trades about -0.14 of its potential returns per unit of risk. The Cheng Shin Rubber is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,640 in Cheng Shin Rubber on August 28, 2024 and sell it today you would earn a total of 380.00 from holding Cheng Shin Rubber or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ton Yi Industrial vs. Cheng Shin Rubber
Performance |
| Timeline |
| Ton Yi Industrial |
| Cheng Shin Rubber |
Ton Yi and Cheng Shin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ton Yi and Cheng Shin
The main advantage of trading using opposite Ton Yi and Cheng Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ton Yi position performs unexpectedly, Cheng Shin 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 Shin will offset losses from the drop in Cheng Shin's long position.The idea behind Ton Yi Industrial and Cheng Shin Rubber 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.| Cheng Shin vs. Taiwan Semiconductor Manufacturing | Cheng Shin vs. Hon Hai Precision | Cheng Shin vs. MediaTek | Cheng Shin vs. Chunghwa Telecom 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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