Correlation Between Chung Hung and Asia Cement

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

By analyzing existing cross correlation between Chung Hung Steel and Asia Cement Corp, you can compare the effects of market volatilities on Chung Hung and Asia Cement 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 Hung with a short position of Asia Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hung and Asia Cement.

Diversification Opportunities for Chung Hung and Asia Cement

0.61

Correlation Coefficient

Chung Hung  Asia Cement

Poor diversification

The 3 months correlation between Chung and Asia is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel and Asia Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Cement Corp and Chung Hung 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 Hung Steel are associated (or correlated) with Asia Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Cement Corp has no effect on the direction of Chung Hung i.e., Chung Hung and Asia Cement go up and down completely randomly.

Pair Corralation between Chung Hung and Asia Cement

Assuming the 90 days trading horizon Chung Hung Steel is expected to generate 2.17 times more return on investment than Asia Cement. However, Chung Hung is 2.17 times more volatile than Asia Cement Corp. It trades about 0.06 of its potential returns per unit of risk. Asia Cement Corp is currently generating about -0.03 per unit of risk. If you would invest  1,785  in Chung Hung Steel on September 5, 2024 and sell it today you would earn a total of  130.00  from holding Chung Hung Steel or generate 7.28% return on investment over 90 days.

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

Chung Hung Steel  vs.  Asia Cement Corp

Chung Hung Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chung Hung Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chung Hung may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Asia Cement Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Cement Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Asia Cement 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 Chung Hung and Asia Cement

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

The idea behind Chung Hung Steel and Asia Cement Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.