Correlation Between Hold Key and Cheng Uei

Can any of the company-specific risk be diversified away by investing in both Hold Key and Cheng Uei 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 Hold Key and Cheng Uei into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hold Key Electric Wire and Cheng Uei Precision, you can compare the effects of market volatilities on Hold Key and Cheng Uei 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 Hold Key with a short position of Cheng Uei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hold Key and Cheng Uei.

Diversification Opportunities for Hold Key and Cheng Uei

0.64

Correlation Coefficient

Hold Key  Cheng Uei

Poor diversification

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

Pair Corralation between Hold Key and Cheng Uei

Assuming the 90 days trading horizon Hold Key Electric Wire is expected to generate 1.35 times more return on investment than Cheng Uei. However, Hold Key is 1.35 times more volatile than Cheng Uei Precision. It trades about 0.08 of its potential returns per unit of risk. Cheng Uei Precision is currently generating about 0.06 per unit of risk. If you would invest  1,535  in Hold Key Electric Wire on October 23, 2024 and sell it today you would earn a total of  2,985  from holding Hold Key Electric Wire or generate 194.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

Hold Key Electric Wire  vs.  Cheng Uei Precision

Hold Key Electric

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hold Key Electric Wire are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hold Key may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cheng Uei Precision

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Uei Precision are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cheng Uei showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hold Key and Cheng Uei

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

The idea behind Hold Key Electric Wire and Cheng Uei Precision 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.