Correlation Between Chia Hsin and China Man

Can any of the company-specific risk be diversified away by investing in both Chia Hsin and China Man 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 Chia Hsin and China Man into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chia Hsin Cement and China Man Made Fiber, you can compare the effects of market volatilities on Chia Hsin and China Man 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 Chia Hsin with a short position of China Man. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia Hsin and China Man.

Diversification Opportunities for Chia Hsin and China Man

0.69

Correlation Coefficient

Chia Hsin  China Man

Poor diversification

The 3 months correlation between Chia and China is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Chia Hsin Cement and China Man Made Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Man Made and Chia Hsin 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 Chia Hsin Cement are associated (or correlated) with China Man. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Man Made has no effect on the direction of Chia Hsin i.e., Chia Hsin and China Man go up and down completely randomly.

Pair Corralation between Chia Hsin and China Man

Assuming the 90 days trading horizon Chia Hsin Cement is expected to generate 0.65 times more return on investment than China Man. However, Chia Hsin Cement is 1.55 times less risky than China Man. It trades about -0.34 of its potential returns per unit of risk. China Man Made Fiber is currently generating about -0.29 per unit of risk. If you would invest  1,800  in Chia Hsin Cement on September 21, 2024 and sell it today you would lose (95.00) from holding Chia Hsin Cement or give up 5.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Chia Hsin Cement  vs.  China Man Made Fiber

Chia Hsin Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chia Hsin Cement has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chia Hsin is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

China Man Made

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Man Made Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Chia Hsin and China Man

The main advantage of trading using opposite Chia Hsin and China Man positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chia Hsin position performs unexpectedly, China Man 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 China Man will offset losses from the drop in China Man's long position.

The idea behind Chia Hsin Cement and China Man Made Fiber 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.