Correlation Between Standard Chemical and Chung Lien

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Can any of the company-specific risk be diversified away by investing in both Standard Chemical and Chung Lien 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 Standard Chemical and Chung Lien into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Chemical Pharmaceutical and Chung Lien Transportation, you can compare the effects of market volatilities on Standard Chemical and Chung Lien 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 Standard Chemical with a short position of Chung Lien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Chemical and Chung Lien.

Diversification Opportunities for Standard Chemical and Chung Lien

StandardChungDiversified AwayStandardChungDiversified Away100%
0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Standard and Chung is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Standard Chemical Pharmaceutic and Chung Lien Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Lien Transportation and Standard Chemical 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 Standard Chemical Pharmaceutical are associated (or correlated) with Chung Lien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Lien Transportation has no effect on the direction of Standard Chemical i.e., Standard Chemical and Chung Lien go up and down completely randomly.

Pair Corralation between Standard Chemical and Chung Lien

Assuming the 90 days trading horizon Standard Chemical Pharmaceutical is expected to under-perform the Chung Lien. In addition to that, Standard Chemical is 1.96 times more volatile than Chung Lien Transportation. It trades about -0.1 of its total potential returns per unit of risk. Chung Lien Transportation is currently generating about -0.02 per unit of volatility. If you would invest  4,220  in Chung Lien Transportation on October 6, 2024 and sell it today you would lose (30.00) from holding Chung Lien Transportation or give up 0.71% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Standard Chemical Pharmaceutic  vs.  Chung Lien Transportation

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -4-202
JavaScript chart by amCharts 3.21.151720 5604
       Timeline  
Standard Chemical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Standard Chemical Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Standard Chemical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan616263646566
Chung Lien Transportation 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chung Lien Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Lien is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan41.54242.54343.544

Standard Chemical and Chung Lien Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.67-1.26-0.85-0.44-0.06250.240.651.061.471.88 0.20.40.60.81.01.21.4
JavaScript chart by amCharts 3.21.151720 5604
       Returns  

Pair Trading with Standard Chemical and Chung Lien

The main advantage of trading using opposite Standard Chemical and Chung Lien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Chemical position performs unexpectedly, Chung Lien 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 Lien will offset losses from the drop in Chung Lien's long position.
The idea behind Standard Chemical Pharmaceutical and Chung Lien Transportation 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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