Correlation Between Chung Hsin and TYC Brother

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

Diversification Opportunities for Chung Hsin and TYC Brother

0.11

Correlation Coefficient

Chung Hsin  TYC Brother

Average diversification

The 3 months correlation between Chung and TYC is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and TYC Brother Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TYC Brother Industrial 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 TYC Brother. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TYC Brother Industrial has no effect on the direction of Chung Hsin i.e., Chung Hsin and TYC Brother go up and down completely randomly.

Pair Corralation between Chung Hsin and TYC Brother

Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the TYC Brother. In addition to that, Chung Hsin is 1.3 times more volatile than TYC Brother Industrial. It trades about -0.07 of its total potential returns per unit of risk. TYC Brother Industrial is currently generating about 0.04 per unit of volatility. If you would invest  6,120  in TYC Brother Industrial on September 17, 2024 and sell it today you would earn a total of  170.00  from holding TYC Brother Industrial or generate 2.78% return on investment over 90 days.

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

Chung Hsin Electric Machinery  vs.  TYC Brother Industrial

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.

TYC Brother Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TYC Brother Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, TYC Brother 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 TYC Brother

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

The idea behind Chung Hsin Electric Machinery and TYC Brother Industrial 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.