Correlation Between Chunghwa Chemical and Panion BF

Can any of the company-specific risk be diversified away by investing in both Chunghwa Chemical and Panion BF 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 Chunghwa Chemical and Panion BF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chunghwa Chemical Synthesis and Panion BF Biotech, you can compare the effects of market volatilities on Chunghwa Chemical and Panion BF 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 Chunghwa Chemical with a short position of Panion BF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Chemical and Panion BF.

Diversification Opportunities for Chunghwa Chemical and Panion BF

0.04

Correlation Coefficient

Chunghwa Chemical  Panion BF

Significant diversification

The 3 months correlation between Chunghwa and Panion is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Chemical Synthesis and Panion BF Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panion BF Biotech and Chunghwa 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 Chunghwa Chemical Synthesis are associated (or correlated) with Panion BF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panion BF Biotech has no effect on the direction of Chunghwa Chemical i.e., Chunghwa Chemical and Panion BF go up and down completely randomly.

Pair Corralation between Chunghwa Chemical and Panion BF

Assuming the 90 days trading horizon Chunghwa Chemical Synthesis is expected to under-perform the Panion BF. But the stock apears to be less risky and, when comparing its historical volatility, Chunghwa Chemical Synthesis is 1.17 times less risky than Panion BF. The stock trades about -0.25 of its potential returns per unit of risk. The Panion BF Biotech is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  8,820  in Panion BF Biotech on September 14, 2024 and sell it today you would lose (260.00) from holding Panion BF Biotech or give up 2.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Chunghwa Chemical Synthesis  vs.  Panion BF Biotech

Chunghwa Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chunghwa Chemical Synthesis 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Panion BF Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Panion BF Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Panion BF 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 Chunghwa Chemical and Panion BF

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

The idea behind Chunghwa Chemical Synthesis and Panion BF Biotech 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.