Correlation Between China Man and Chia Hsin

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

By analyzing existing cross correlation between China Man Made Fiber and Chia Hsin Cement, you can compare the effects of market volatilities on China Man and Chia 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 China Man with a short position of Chia Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Man and Chia Hsin.

Diversification Opportunities for China Man and Chia Hsin

0.69

Correlation Coefficient

China Man  Chia Hsin

Poor diversification

The 3 months correlation between China and Chia is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding China Man Made Fiber and Chia Hsin Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Hsin Cement and China Man 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 China Man Made Fiber are associated (or correlated) with Chia Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Hsin Cement has no effect on the direction of China Man i.e., China Man and Chia Hsin go up and down completely randomly.

Pair Corralation between China Man and Chia Hsin

Assuming the 90 days trading horizon China Man Made Fiber is expected to under-perform the Chia Hsin. In addition to that, China Man is 1.55 times more volatile than Chia Hsin Cement. It trades about -0.29 of its total potential returns per unit of risk. Chia Hsin Cement is currently generating about -0.34 per unit of volatility. If you would invest  1,800  in Chia Hsin Cement on September 21, 2024 and sell it today you would lose (95.00) from holding Chia Hsin Cement or give up 5.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

China Man Made Fiber  vs.  Chia Hsin Cement

China Man Made

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Man Made Fiber 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.

Chia Hsin Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chia Hsin Cement has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chia 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 China Man and Chia Hsin

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

The idea behind China Man Made Fiber and Chia Hsin Cement 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.