Correlation Between Chung Hwa and Kenda Rubber

Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Kenda Rubber 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 Kenda Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chung Hwa Pulp and Kenda Rubber Industrial, you can compare the effects of market volatilities on Chung Hwa and Kenda Rubber 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 Kenda Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Kenda Rubber.

Diversification Opportunities for Chung Hwa and Kenda Rubber

0.82

Correlation Coefficient

Chung Hwa  Kenda Rubber

Very poor diversification

The 3 months correlation between Chung and Kenda is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Pulp and Kenda Rubber Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenda Rubber Industrial 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 Pulp are associated (or correlated) with Kenda Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenda Rubber Industrial has no effect on the direction of Chung Hwa i.e., Chung Hwa and Kenda Rubber go up and down completely randomly.

Pair Corralation between Chung Hwa and Kenda Rubber

Assuming the 90 days trading horizon Chung Hwa Pulp is expected to under-perform the Kenda Rubber. In addition to that, Chung Hwa is 1.44 times more volatile than Kenda Rubber Industrial. It trades about -0.21 of its total potential returns per unit of risk. Kenda Rubber Industrial is currently generating about -0.15 per unit of volatility. If you would invest  2,995  in Kenda Rubber Industrial on September 18, 2024 and sell it today you would lose (295.00) from holding Kenda Rubber Industrial or give up 9.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Chung Hwa Pulp  vs.  Kenda Rubber Industrial

Chung Hwa Pulp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Hwa Pulp 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.

Kenda Rubber Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kenda Rubber Industrial 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.

Pair Trading with Chung Hwa and Kenda Rubber

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

The idea behind Chung Hwa Pulp and Kenda Rubber Industrial 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.