Correlation Between Chung Hsin and Shin Ruenn

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

Diversification Opportunities for Chung Hsin and Shin Ruenn

-0.01

Correlation Coefficient

Chung Hsin  Shin Ruenn

Good diversification

The 3 months correlation between Chung and Shin is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Shin Ruenn Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Ruenn Development 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 Shin Ruenn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Ruenn Development has no effect on the direction of Chung Hsin i.e., Chung Hsin and Shin Ruenn go up and down completely randomly.

Pair Corralation between Chung Hsin and Shin Ruenn

Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the Shin Ruenn. In addition to that, Chung Hsin is 1.11 times more volatile than Shin Ruenn Development. It trades about -0.03 of its total potential returns per unit of risk. Shin Ruenn Development is currently generating about 0.07 per unit of volatility. If you would invest  6,130  in Shin Ruenn Development on December 21, 2024 and sell it today you would earn a total of  350.00  from holding Shin Ruenn Development or generate 5.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Chung Hsin Electric Machinery  vs.  Shin Ruenn Development

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.

Shin Ruenn Development

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Ruenn Development are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shin Ruenn may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Chung Hsin and Shin Ruenn

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

The idea behind Chung Hsin Electric Machinery and Shin Ruenn Development 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.