Correlation Between Chung Hsin and Rexon Industrial

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

Diversification Opportunities for Chung Hsin and Rexon Industrial

-0.32

Correlation Coefficient

Chung Hsin  Rexon Industrial

Very good diversification

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

Pair Corralation between Chung Hsin and Rexon Industrial

Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the Rexon Industrial. In addition to that, Chung Hsin is 1.12 times more volatile than Rexon Industrial Corp. It trades about 0.0 of its total potential returns per unit of risk. Rexon Industrial Corp is currently generating about 0.15 per unit of volatility. If you would invest  3,110  in Rexon Industrial Corp on December 27, 2024 and sell it today you would earn a total of  410.00  from holding Rexon Industrial Corp or generate 13.18% return on investment over 90 days.

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

Chung Hsin Electric Machinery  vs.  Rexon Industrial 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.

Rexon Industrial Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rexon Industrial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Rexon Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chung Hsin and Rexon Industrial

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

The idea behind Chung Hsin Electric Machinery and Rexon Industrial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.