Correlation Between Chung Hwa and Magnate Technology

Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Magnate Technology 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 Magnate Technology 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 Magnate Technology Co, you can compare the effects of market volatilities on Chung Hwa and Magnate Technology 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 Magnate Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Magnate Technology.

Diversification Opportunities for Chung Hwa and Magnate Technology

-0.45

Correlation Coefficient

Chung Hwa  Magnate Technology

Very good diversification

The 3 months correlation between Chung and Magnate is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Chemical and Magnate Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnate Technology 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 Magnate Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnate Technology has no effect on the direction of Chung Hwa i.e., Chung Hwa and Magnate Technology go up and down completely randomly.

Pair Corralation between Chung Hwa and Magnate Technology

Assuming the 90 days trading horizon Chung Hwa Chemical is expected to under-perform the Magnate Technology. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hwa Chemical is 1.32 times less risky than Magnate Technology. The stock trades about -0.24 of its potential returns per unit of risk. The Magnate Technology Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,085  in Magnate Technology Co on October 26, 2024 and sell it today you would earn a total of  435.00  from holding Magnate Technology Co or generate 14.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Chung Hwa Chemical  vs.  Magnate Technology Co

Chung Hwa Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Hwa Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Magnate Technology

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magnate Technology Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Magnate Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chung Hwa and Magnate Technology

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

The idea behind Chung Hwa Chemical and Magnate Technology Co 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.