Correlation Between Chung Hsin and Andes Technology

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

Diversification Opportunities for Chung Hsin and Andes Technology

-0.33

Correlation Coefficient

Chung Hsin  Andes Technology

Very good diversification

The 3 months correlation between Chung and Andes is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Andes Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andes Technology Corp 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 Andes Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andes Technology Corp has no effect on the direction of Chung Hsin i.e., Chung Hsin and Andes Technology go up and down completely randomly.

Pair Corralation between Chung Hsin and Andes Technology

Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the Andes Technology. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hsin Electric Machinery is 1.2 times less risky than Andes Technology. The stock trades about -0.09 of its potential returns per unit of risk. The Andes Technology Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  36,500  in Andes Technology Corp on September 18, 2024 and sell it today you would earn a total of  3,500  from holding Andes Technology Corp or generate 9.59% return on investment over 90 days.

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

Chung Hsin Electric Machinery  vs.  Andes Technology Corp

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.

Andes Technology Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Andes Technology Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Andes Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chung Hsin and Andes Technology

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

The idea behind Chung Hsin Electric Machinery and Andes Technology Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.