Correlation Between Chung Hwa and Yageo Corp
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Yageo Corp 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 Chung Hwa and Yageo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hwa Chemical and Yageo Corp, you can compare the effects of market volatilities on Chung Hwa and Yageo Corp 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 Chung Hwa with a short position of Yageo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Yageo Corp.
Diversification Opportunities for Chung Hwa and Yageo Corp
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Chung and Yageo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Chemical and Yageo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yageo Corp and Chung Hwa 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 Chung Hwa Chemical are associated (or correlated) with Yageo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yageo Corp has no effect on the direction of Chung Hwa i.e., Chung Hwa and Yageo Corp go up and down completely randomly.
Pair Corralation between Chung Hwa and Yageo Corp
Assuming the 90 days trading horizon Chung Hwa Chemical is expected to under-perform the Yageo Corp. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hwa Chemical is 1.12 times less risky than Yageo Corp. The stock trades about -0.06 of its potential returns per unit of risk. The Yageo Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 53,600 in Yageo Corp on December 29, 2024 and sell it today you would lose (2,600) from holding Yageo Corp or give up 4.85% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Chung Hwa Chemical vs. Yageo Corp
Performance |
Timeline |
Chung Hwa Chemical |
Yageo Corp |
Chung Hwa and Yageo Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chung Hwa and Yageo Corp
The main advantage of trading using opposite Chung Hwa and Yageo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, Yageo Corp 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 Yageo Corp will offset losses from the drop in Yageo Corp's long position.Chung Hwa vs. Oriental Union Chemical | Chung Hwa vs. Everlight Chemical Industrial | Chung Hwa vs. Formosan Union Chemical | Chung Hwa vs. Sesoda Corp |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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