Correlation Between Chung Hsin and Asia Vital

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

Diversification Opportunities for Chung Hsin and Asia Vital

-0.52

Correlation Coefficient

Chung Hsin  Asia Vital

Excellent diversification

The 3 months correlation between Chung and Asia is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Asia Vital Components in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Vital Components 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 Asia Vital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Vital Components has no effect on the direction of Chung Hsin i.e., Chung Hsin and Asia Vital go up and down completely randomly.

Pair Corralation between Chung Hsin and Asia Vital

Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the Asia Vital. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hsin Electric Machinery is 1.46 times less risky than Asia Vital. The stock trades about -0.09 of its potential returns per unit of risk. The Asia Vital Components is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  53,700  in Asia Vital Components on September 18, 2024 and sell it today you would earn a total of  10,000  from holding Asia Vital Components or generate 18.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Chung Hsin Electric Machinery  vs.  Asia Vital Components

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.

Asia Vital Components

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Vital Components are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asia Vital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chung Hsin and Asia Vital

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

The idea behind Chung Hsin Electric Machinery and Asia Vital Components 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 Transaction History module to view history of all your transactions and understand their impact on performance.