Correlation Between Chung Hung and STARLUX Airlines

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

Diversification Opportunities for Chung Hung and STARLUX Airlines

0.56

Correlation Coefficient

Chung Hung  STARLUX Airlines

Very weak diversification

The 3 months correlation between Chung and STARLUX is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel and STARLUX Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STARLUX Airlines 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 STARLUX Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STARLUX Airlines has no effect on the direction of Chung Hung i.e., Chung Hung and STARLUX Airlines go up and down completely randomly.

Pair Corralation between Chung Hung and STARLUX Airlines

Assuming the 90 days trading horizon Chung Hung Steel is expected to under-perform the STARLUX Airlines. In addition to that, Chung Hung is 1.3 times more volatile than STARLUX Airlines Co. It trades about -0.18 of its total potential returns per unit of risk. STARLUX Airlines Co is currently generating about -0.1 per unit of volatility. If you would invest  3,060  in STARLUX Airlines Co on September 30, 2024 and sell it today you would lose (270.00) from holding STARLUX Airlines Co or give up 8.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Chung Hung Steel  vs.  STARLUX Airlines Co

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 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.

STARLUX Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STARLUX Airlines Co 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 Hung and STARLUX Airlines

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

The idea behind Chung Hung Steel and STARLUX Airlines Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..