Correlation Between Lee Chi and ChipMOS Technologies

Can any of the company-specific risk be diversified away by investing in both Lee Chi and ChipMOS Technologies 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 Lee Chi and ChipMOS Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lee Chi Enterprises and ChipMOS Technologies, you can compare the effects of market volatilities on Lee Chi and ChipMOS Technologies 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 Lee Chi with a short position of ChipMOS Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lee Chi and ChipMOS Technologies.

Diversification Opportunities for Lee Chi and ChipMOS Technologies

0.84

Correlation Coefficient

Lee Chi  ChipMOS Technologies

Very poor diversification

The 3 months correlation between Lee and ChipMOS is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lee Chi Enterprises and ChipMOS Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChipMOS Technologies and Lee Chi 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 Lee Chi Enterprises are associated (or correlated) with ChipMOS Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChipMOS Technologies has no effect on the direction of Lee Chi i.e., Lee Chi and ChipMOS Technologies go up and down completely randomly.

Pair Corralation between Lee Chi and ChipMOS Technologies

Assuming the 90 days trading horizon Lee Chi Enterprises is expected to under-perform the ChipMOS Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Lee Chi Enterprises is 1.07 times less risky than ChipMOS Technologies. The stock trades about -0.05 of its potential returns per unit of risk. The ChipMOS Technologies is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,405  in ChipMOS Technologies on October 11, 2024 and sell it today you would lose (315.00) from holding ChipMOS Technologies or give up 9.25% of portfolio value over 90 days.

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

Lee Chi Enterprises  vs.  ChipMOS Technologies

Lee Chi Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lee Chi Enterprises 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.

ChipMOS Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChipMOS Technologies 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 Lee Chi and ChipMOS Technologies

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

The idea behind Lee Chi Enterprises and ChipMOS Technologies 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.

Check out your portfolio center.

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.