Correlation Between Shihlin Electric and Chung Hsin

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

By analyzing existing cross correlation between Shihlin Electric Engineering and Chung Hsin Electric Machinery, you can compare the effects of market volatilities on Shihlin Electric and Chung 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 Shihlin Electric with a short position of Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shihlin Electric and Chung Hsin.

Diversification Opportunities for Shihlin Electric and Chung Hsin

0.76

Correlation Coefficient

Shihlin Electric  Chung Hsin

Poor diversification

The 3 months correlation between Shihlin and Chung is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Shihlin Electric Engineering and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric and Shihlin Electric 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 Shihlin Electric Engineering are associated (or correlated) with Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of Shihlin Electric i.e., Shihlin Electric and Chung Hsin go up and down completely randomly.

Pair Corralation between Shihlin Electric and Chung Hsin

Assuming the 90 days trading horizon Shihlin Electric Engineering is expected to under-perform the Chung Hsin. In addition to that, Shihlin Electric is 1.37 times more volatile than Chung Hsin Electric Machinery. It trades about -0.08 of its total potential returns per unit of risk. Chung Hsin Electric Machinery is currently generating about 0.0 per unit of volatility. If you would invest  15,250  in Chung Hsin Electric Machinery on December 28, 2024 and sell it today you would lose (200.00) from holding Chung Hsin Electric Machinery or give up 1.31% of portfolio value over 90 days.

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

Shihlin Electric Engineering  vs.  Chung Hsin Electric Machinery

Shihlin Electric Eng

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shihlin Electric Engineering 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Chung Hsin Electric

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chung Hsin Electric Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Hsin 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 Shihlin Electric and Chung Hsin

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

The idea behind Shihlin Electric Engineering and Chung Hsin Electric Machinery 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.