Correlation Between Sheng Yu and Chung Hung

Can any of the company-specific risk be diversified away by investing in both Sheng Yu and Chung Hung 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 Sheng Yu and Chung Hung into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Sheng Yu and Chung Hung

0.95

Correlation Coefficient

Sheng Yu  Chung Hung

Almost no diversification

The 3 months correlation between Sheng and Chung is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Sheng Yu Steel and Chung Hung Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hung Steel and Sheng Yu 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 Sheng Yu Steel are associated (or correlated) with Chung Hung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hung Steel has no effect on the direction of Sheng Yu i.e., Sheng Yu and Chung Hung go up and down completely randomly.

Pair Corralation between Sheng Yu and Chung Hung

Assuming the 90 days trading horizon Sheng Yu is expected to generate 2.07 times less return on investment than Chung Hung. But when comparing it to its historical volatility, Sheng Yu Steel is 2.24 times less risky than Chung Hung. It trades about 0.13 of its potential returns per unit of risk. Chung Hung Steel is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,785  in Chung Hung Steel on December 29, 2024 and sell it today you would earn a total of  375.00  from holding Chung Hung Steel or generate 21.01% return on investment over 90 days.

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

Sheng Yu Steel  vs.  Chung Hung Steel

Sheng Yu Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sheng Yu Steel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sheng Yu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Chung Hung Steel

Risk-Adjusted Performance

OK

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

Pair Trading with Sheng Yu and Chung Hung

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

The idea behind Sheng Yu Steel and Chung Hung 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.