Correlation Between Tex Ray and Chia Yi

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

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

Diversification Opportunities for Tex Ray and Chia Yi

0.32

Correlation Coefficient

Tex Ray  Chia Yi

Weak diversification

The 3 months correlation between Tex and Chia is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tex Ray Industrial Co and Chia Yi Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Yi Steel and Tex Ray 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 Tex Ray Industrial Co are associated (or correlated) with Chia Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Yi Steel has no effect on the direction of Tex Ray i.e., Tex Ray and Chia Yi go up and down completely randomly.

Pair Corralation between Tex Ray and Chia Yi

Assuming the 90 days trading horizon Tex Ray Industrial Co is expected to under-perform the Chia Yi. But the stock apears to be less risky and, when comparing its historical volatility, Tex Ray Industrial Co is 2.97 times less risky than Chia Yi. The stock trades about -0.38 of its potential returns per unit of risk. The Chia Yi Steel is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,175  in Chia Yi Steel on September 19, 2024 and sell it today you would lose (70.00) from holding Chia Yi Steel or give up 5.96% of portfolio value over 90 days.

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

Tex Ray Industrial Co  vs.  Chia Yi Steel

Tex Ray Industrial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tex Ray Industrial Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Tex Ray is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chia Yi Steel

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Yi Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chia Yi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tex Ray and Chia Yi

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

The idea behind Tex Ray Industrial Co and Chia Yi Steel 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.