Correlation Between Chung Hsin and USI Corp

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

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

Diversification Opportunities for Chung Hsin and USI Corp

0.46

Correlation Coefficient

Chung Hsin  USI Corp

Very weak diversification

The 3 months correlation between Chung and USI is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and USI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USI Corp and Chung Hsin 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 Chung Hsin Electric Machinery are associated (or correlated) with USI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USI Corp has no effect on the direction of Chung Hsin i.e., Chung Hsin and USI Corp go up and down completely randomly.

Pair Corralation between Chung Hsin and USI Corp

Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the USI Corp. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hsin Electric Machinery is 1.31 times less risky than USI Corp. The stock trades about -0.06 of its potential returns per unit of risk. The USI Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,125  in USI Corp on December 5, 2024 and sell it today you would earn a total of  50.00  from holding USI Corp or generate 4.44% return on investment over 90 days.

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

Chung Hsin Electric Machinery  vs.  USI Corp

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.

USI Corp

Risk-Adjusted Performance

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 fairly stable basic indicators, USI Corp 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 Chung Hsin and USI Corp

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

The idea behind Chung Hsin Electric Machinery and USI Corp 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.