Correlation Between Chung Hung and Fu Burg

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

Diversification Opportunities for Chung Hung and Fu Burg

0.02

Correlation Coefficient

Chung Hung  Fu Burg

Significant diversification

The 3 months correlation between Chung and 8929 is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel and Fu Burg Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fu Burg Industrial 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 Fu Burg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fu Burg Industrial has no effect on the direction of Chung Hung i.e., Chung Hung and Fu Burg go up and down completely randomly.

Pair Corralation between Chung Hung and Fu Burg

Assuming the 90 days trading horizon Chung Hung Steel is expected to generate 1.15 times more return on investment than Fu Burg. However, Chung Hung is 1.15 times more volatile than Fu Burg Industrial. It trades about 0.12 of its potential returns per unit of risk. Fu Burg Industrial is currently generating about -0.22 per unit of risk. If you would invest  1,805  in Chung Hung Steel on October 23, 2024 and sell it today you would earn a total of  85.00  from holding Chung Hung Steel or generate 4.71% return on investment over 90 days.

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

Chung Hung Steel  vs.  Fu Burg Industrial

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 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.

Fu Burg Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chung Hung and Fu Burg

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

The idea behind Chung Hung Steel and Fu Burg Industrial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.