Correlation Between Chung Hsin and Chong Hong

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

Diversification Opportunities for Chung Hsin and Chong Hong

0.16

Correlation Coefficient

Chung Hsin  Chong Hong

Average diversification

The 3 months correlation between Chung and Chong is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Chong Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chong Hong Construction 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 Chong Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chong Hong Construction has no effect on the direction of Chung Hsin i.e., Chung Hsin and Chong Hong go up and down completely randomly.

Pair Corralation between Chung Hsin and Chong Hong

Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the Chong Hong. In addition to that, Chung Hsin is 1.16 times more volatile than Chong Hong Construction. It trades about -0.04 of its total potential returns per unit of risk. Chong Hong Construction is currently generating about 0.1 per unit of volatility. If you would invest  8,760  in Chong Hong Construction on December 5, 2024 and sell it today you would earn a total of  740.00  from holding Chong Hong Construction or generate 8.45% 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.  Chong Hong Construction

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.

Chong Hong Construction

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chong Hong Construction are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chong Hong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Chung Hsin and Chong Hong

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

The idea behind Chung Hsin Electric Machinery and Chong Hong Construction 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.