Correlation Between Chung Hung and Sheng Yu

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

Diversification Opportunities for Chung Hung and Sheng Yu

0.95

Correlation Coefficient

Chung Hung  Sheng Yu

Almost no diversification

The 3 months correlation between Chung and Sheng is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel and Sheng Yu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sheng Yu Steel 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 Sheng Yu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sheng Yu Steel has no effect on the direction of Chung Hung i.e., Chung Hung and Sheng Yu go up and down completely randomly.

Pair Corralation between Chung Hung and Sheng Yu

Assuming the 90 days trading horizon Chung Hung Steel is expected to generate 2.24 times more return on investment than Sheng Yu. However, Chung Hung is 2.24 times more volatile than Sheng Yu Steel. It trades about 0.12 of its potential returns per unit of risk. Sheng Yu Steel is currently generating about 0.13 per unit of risk. If you would invest  1,785  in Chung Hung Steel on December 29, 2024 and sell it today you would earn a total of  375.00  from holding Chung Hung Steel or generate 21.01% return on investment over 90 days.

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

Chung Hung Steel  vs.  Sheng Yu Steel

Chung Hung Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chung Hung Steel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chung Hung showed solid returns over the last few months and may actually be approaching a breakup point.

Sheng Yu Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sheng Yu Steel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sheng Yu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Chung Hung and Sheng Yu

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

The idea behind Chung Hung Steel and Sheng Yu Steel 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.