Correlation Between Kaulin Mfg and Chung Hsin

Can any of the company-specific risk be diversified away by investing in both Kaulin Mfg and Chung Hsin 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 Kaulin Mfg and Chung Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kaulin Mfg and Chung Hsin Electric Machinery, you can compare the effects of market volatilities on Kaulin Mfg and Chung Hsin 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 Kaulin Mfg with a short position of Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaulin Mfg and Chung Hsin.

Diversification Opportunities for Kaulin Mfg and Chung Hsin

0.64

Correlation Coefficient

Kaulin Mfg  Chung Hsin

Poor diversification

The 3 months correlation between Kaulin and Chung is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Kaulin Mfg and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric and Kaulin Mfg 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 Kaulin Mfg are associated (or correlated) with Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of Kaulin Mfg i.e., Kaulin Mfg and Chung Hsin go up and down completely randomly.

Pair Corralation between Kaulin Mfg and Chung Hsin

Assuming the 90 days trading horizon Kaulin Mfg is expected to under-perform the Chung Hsin. But the stock apears to be less risky and, when comparing its historical volatility, Kaulin Mfg is 1.0 times less risky than Chung Hsin. The stock trades about -0.13 of its potential returns per unit of risk. The Chung Hsin Electric Machinery is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  15,250  in Chung Hsin Electric Machinery on October 24, 2024 and sell it today you would lose (50.00) from holding Chung Hsin Electric Machinery or give up 0.33% of portfolio value over 90 days.

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

Kaulin Mfg  vs.  Chung Hsin Electric Machinery

Kaulin Mfg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaulin Mfg has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kaulin Mfg is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 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.

Pair Trading with Kaulin Mfg and Chung Hsin

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

The idea behind Kaulin Mfg and Chung Hsin Electric Machinery 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.