Correlation Between Chyang Sheng and China Times

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

By analyzing existing cross correlation between Chyang Sheng Dyeing and China Times Publishing, you can compare the effects of market volatilities on Chyang Sheng and China Times 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 Chyang Sheng with a short position of China Times. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chyang Sheng and China Times.

Diversification Opportunities for Chyang Sheng and China Times

0.15

Correlation Coefficient

Chyang Sheng  China Times

Average diversification

The 3 months correlation between Chyang and China is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chyang Sheng Dyeing and China Times Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Times Publishing and Chyang Sheng 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 Chyang Sheng Dyeing are associated (or correlated) with China Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Times Publishing has no effect on the direction of Chyang Sheng i.e., Chyang Sheng and China Times go up and down completely randomly.

Pair Corralation between Chyang Sheng and China Times

Assuming the 90 days trading horizon Chyang Sheng Dyeing is expected to generate 0.21 times more return on investment than China Times. However, Chyang Sheng Dyeing is 4.68 times less risky than China Times. It trades about 0.08 of its potential returns per unit of risk. China Times Publishing is currently generating about -0.03 per unit of risk. If you would invest  2,495  in Chyang Sheng Dyeing on October 9, 2024 and sell it today you would earn a total of  25.00  from holding Chyang Sheng Dyeing or generate 1.0% return on investment over 90 days.

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

Chyang Sheng Dyeing  vs.  China Times Publishing

Chyang Sheng Dyeing

Risk-Adjusted Performance

11 of 100

OK

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

China Times Publishing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Times Publishing are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Times showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chyang Sheng and China Times

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

The idea behind Chyang Sheng Dyeing and China Times Publishing 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.