Correlation Between USI Corp and Cheng Shin

Can any of the company-specific risk be diversified away by investing in both USI Corp 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 USI Corp and Cheng Shin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between USI Corp and Cheng Shin Rubber, you can compare the effects of market volatilities on USI Corp 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 USI Corp with a short position of Cheng Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of USI Corp and Cheng Shin.

Diversification Opportunities for USI Corp and Cheng Shin

-0.17

Correlation Coefficient

USI Corp  Cheng Shin

Good diversification

The 3 months correlation between USI and Cheng is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding USI Corp 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 USI Corp 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 USI Corp 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 USI Corp i.e., USI Corp and Cheng Shin go up and down completely randomly.

Pair Corralation between USI Corp and Cheng Shin

Assuming the 90 days trading horizon USI Corp is expected to under-perform the Cheng Shin. But the stock apears to be less risky and, when comparing its historical volatility, USI Corp is 1.04 times less risky than Cheng Shin. The stock trades about -0.17 of its potential returns per unit of risk. The Cheng Shin Rubber is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,985  in Cheng Shin Rubber on October 3, 2024 and sell it today you would lose (80.00) from holding Cheng Shin Rubber or give up 1.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

USI Corp  vs.  Cheng Shin Rubber

USI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Cheng Shin Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with USI Corp and Cheng Shin

The main advantage of trading using opposite USI Corp and Cheng Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USI Corp 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 USI Corp 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.