Correlation Between Chung Hung and Hsin Kuang

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

Diversification Opportunities for Chung Hung and Hsin Kuang

0.32

Correlation Coefficient

Chung Hung  Hsin Kuang

Weak diversification

The 3 months correlation between Chung and Hsin is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel and Hsin Kuang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Kuang 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 Hsin Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Kuang Steel has no effect on the direction of Chung Hung i.e., Chung Hung and Hsin Kuang go up and down completely randomly.

Pair Corralation between Chung Hung and Hsin Kuang

Assuming the 90 days trading horizon Chung Hung Steel is expected to under-perform the Hsin Kuang. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hung Steel is 1.02 times less risky than Hsin Kuang. The stock trades about -0.06 of its potential returns per unit of risk. The Hsin Kuang Steel is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,800  in Hsin Kuang Steel on September 13, 2024 and sell it today you would lose (990.00) from holding Hsin Kuang Steel or give up 17.07% of portfolio value over 90 days.

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

Chung Hung Steel  vs.  Hsin Kuang Steel

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.

Hsin Kuang Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hsin Kuang Steel 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.

Pair Trading with Chung Hung and Hsin Kuang

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

The idea behind Chung Hung Steel and Hsin Kuang 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.