Correlation Between Chung Hsin and Microtips Technology

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

Diversification Opportunities for Chung Hsin and Microtips Technology

0.69

Correlation Coefficient

Chung Hsin  Microtips Technology

Poor diversification

The 3 months correlation between Chung and Microtips is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Microtips Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microtips Technology 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 Microtips Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microtips Technology has no effect on the direction of Chung Hsin i.e., Chung Hsin and Microtips Technology go up and down completely randomly.

Pair Corralation between Chung Hsin and Microtips Technology

Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to generate 1.15 times more return on investment than Microtips Technology. However, Chung Hsin is 1.15 times more volatile than Microtips Technology. It trades about -0.09 of its potential returns per unit of risk. Microtips Technology is currently generating about -0.15 per unit of risk. If you would invest  16,200  in Chung Hsin Electric Machinery on October 22, 2024 and sell it today you would lose (1,650) from holding Chung Hsin Electric Machinery or give up 10.19% of portfolio value over 90 days.

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

Chung Hsin Electric Machinery  vs.  Microtips Technology

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.

Microtips Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microtips Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Chung Hsin and Microtips Technology

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

The idea behind Chung Hsin Electric Machinery and Microtips Technology 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.