Correlation Between Chung Hsin and Cathay Consolidated

Can any of the company-specific risk be diversified away by investing in both Chung Hsin and Cathay Consolidated 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 Cathay Consolidated 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 Cathay Consolidated, you can compare the effects of market volatilities on Chung Hsin and Cathay Consolidated 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 Cathay Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hsin and Cathay Consolidated.

Diversification Opportunities for Chung Hsin and Cathay Consolidated

-0.4

Correlation Coefficient

Chung Hsin  Cathay Consolidated

Very good diversification

The 3 months correlation between Chung and Cathay is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Cathay Consolidated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Consolidated 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 Cathay Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Consolidated has no effect on the direction of Chung Hsin i.e., Chung Hsin and Cathay Consolidated go up and down completely randomly.

Pair Corralation between Chung Hsin and Cathay Consolidated

Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the Cathay Consolidated. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hsin Electric Machinery is 1.07 times less risky than Cathay Consolidated. The stock trades about -0.04 of its potential returns per unit of risk. The Cathay Consolidated is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  9,910  in Cathay Consolidated on September 17, 2024 and sell it today you would earn a total of  890.00  from holding Cathay Consolidated or generate 8.98% return on investment over 90 days.

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

Chung Hsin Electric Machinery  vs.  Cathay Consolidated

Chung Hsin Electric

Risk-Adjusted Performance

0 of 100

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Cathay Consolidated

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Consolidated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cathay Consolidated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chung Hsin and Cathay Consolidated

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

The idea behind Chung Hsin Electric Machinery and Cathay Consolidated 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.