Correlation Between Hung Chou and Chia Her

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

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

Diversification Opportunities for Hung Chou and Chia Her

0.14

Correlation Coefficient

Hung Chou  Chia Her

Average diversification

The 3 months correlation between Hung and Chia is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Hung Chou Fiber and Chia Her Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Her Industrial and Hung Chou 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 Hung Chou Fiber are associated (or correlated) with Chia Her. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Her Industrial has no effect on the direction of Hung Chou i.e., Hung Chou and Chia Her go up and down completely randomly.

Pair Corralation between Hung Chou and Chia Her

Assuming the 90 days trading horizon Hung Chou Fiber is expected to under-perform the Chia Her. But the stock apears to be less risky and, when comparing its historical volatility, Hung Chou Fiber is 2.77 times less risky than Chia Her. The stock trades about -0.02 of its potential returns per unit of risk. The Chia Her Industrial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,900  in Chia Her Industrial on September 5, 2024 and sell it today you would earn a total of  635.00  from holding Chia Her Industrial or generate 33.42% return on investment over 90 days.

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

Hung Chou Fiber  vs.  Chia Her Industrial

Hung Chou Fiber

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hung Chou Fiber are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hung Chou may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chia Her Industrial

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Her Industrial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chia Her showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hung Chou and Chia Her

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

The idea behind Hung Chou Fiber and Chia Her Industrial 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.