Correlation Between Hsing Ta and Chia Hsin

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

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

Diversification Opportunities for Hsing Ta and Chia Hsin

0.8

Correlation Coefficient

Hsing Ta  Chia Hsin

Very poor diversification

The 3 months correlation between Hsing and Chia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hsing Ta Cement and Chia Hsin Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Hsin Cement and Hsing Ta 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 Hsing Ta Cement are associated (or correlated) with Chia Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Hsin Cement has no effect on the direction of Hsing Ta i.e., Hsing Ta and Chia Hsin go up and down completely randomly.

Pair Corralation between Hsing Ta and Chia Hsin

Assuming the 90 days trading horizon Hsing Ta Cement is expected to generate 0.79 times more return on investment than Chia Hsin. However, Hsing Ta Cement is 1.26 times less risky than Chia Hsin. It trades about 0.02 of its potential returns per unit of risk. Chia Hsin Cement is currently generating about -0.02 per unit of risk. If you would invest  1,680  in Hsing Ta Cement on December 4, 2024 and sell it today you would earn a total of  115.00  from holding Hsing Ta Cement or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Hsing Ta Cement  vs.  Chia Hsin Cement

Hsing Ta Cement

Risk-Adjusted Performance

Very Weak

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

Chia Hsin Cement

Risk-Adjusted Performance

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 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 Hsing Ta and Chia Hsin

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

The idea behind Hsing Ta Cement and Chia Hsin Cement 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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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.