Correlation Between Chung Hung and Asustek Computer

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

Diversification Opportunities for Chung Hung and Asustek Computer

0.15

Correlation Coefficient

Chung Hung  Asustek Computer

Average diversification

The 3 months correlation between Chung and Asustek is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel and Asustek Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asustek Computer 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 Asustek Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asustek Computer has no effect on the direction of Chung Hung i.e., Chung Hung and Asustek Computer go up and down completely randomly.

Pair Corralation between Chung Hung and Asustek Computer

Assuming the 90 days trading horizon Chung Hung Steel is expected to under-perform the Asustek Computer. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hung Steel is 1.19 times less risky than Asustek Computer. The stock trades about -0.03 of its potential returns per unit of risk. The Asustek Computer is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  27,200  in Asustek Computer on September 16, 2024 and sell it today you would earn a total of  34,300  from holding Asustek Computer or generate 126.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Chung Hung Steel  vs.  Asustek Computer

Chung Hung Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Hung Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Hung is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Asustek Computer

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Chung Hung and Asustek Computer

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

The idea behind Chung Hung Steel and Asustek Computer 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.