Correlation Between Feng Hsin and Chia Yi

Can any of the company-specific risk be diversified away by investing in both Feng Hsin and Chia Yi 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 Feng Hsin and Chia Yi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Feng Hsin Steel and Chia Yi Steel, you can compare the effects of market volatilities on Feng Hsin and Chia Yi 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 Feng Hsin with a short position of Chia Yi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Feng Hsin and Chia Yi.

Diversification Opportunities for Feng Hsin and Chia Yi

-0.61

Correlation Coefficient

Feng Hsin  Chia Yi

Excellent diversification

The 3 months correlation between Feng and Chia is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Feng Hsin Steel and Chia Yi Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Yi Steel and Feng Hsin 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 Feng Hsin Steel are associated (or correlated) with Chia Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Yi Steel has no effect on the direction of Feng Hsin i.e., Feng Hsin and Chia Yi go up and down completely randomly.

Pair Corralation between Feng Hsin and Chia Yi

Assuming the 90 days trading horizon Feng Hsin Steel is expected to under-perform the Chia Yi. But the stock apears to be less risky and, when comparing its historical volatility, Feng Hsin Steel is 3.28 times less risky than Chia Yi. The stock trades about -0.35 of its potential returns per unit of risk. The Chia Yi Steel is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,175  in Chia Yi Steel on September 19, 2024 and sell it today you would lose (70.00) from holding Chia Yi Steel or give up 5.96% of portfolio value over 90 days.

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

Feng Hsin Steel  vs.  Chia Yi Steel

Feng Hsin Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Feng Hsin 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.

Chia Yi Steel

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Yi Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chia Yi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Feng Hsin and Chia Yi

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

The idea behind Feng Hsin Steel and Chia Yi 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.