Correlation Between Hsin Kuang and Wei Chih
Can any of the company-specific risk be diversified away by investing in both Hsin Kuang and Wei Chih 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 Hsin Kuang and Wei Chih into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hsin Kuang Steel and Wei Chih Steel, you can compare the effects of market volatilities on Hsin Kuang and Wei Chih 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 Hsin Kuang with a short position of Wei Chih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hsin Kuang and Wei Chih.
Diversification Opportunities for Hsin Kuang and Wei Chih
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hsin and Wei is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hsin Kuang Steel and Wei Chih Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wei Chih Steel and Hsin Kuang 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 Hsin Kuang Steel are associated (or correlated) with Wei Chih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wei Chih Steel has no effect on the direction of Hsin Kuang i.e., Hsin Kuang and Wei Chih go up and down completely randomly.
Pair Corralation between Hsin Kuang and Wei Chih
Assuming the 90 days trading horizon Hsin Kuang Steel is expected to under-perform the Wei Chih. But the stock apears to be less risky and, when comparing its historical volatility, Hsin Kuang Steel is 1.05 times less risky than Wei Chih. The stock trades about -0.4 of its potential returns per unit of risk. The Wei Chih Steel is currently generating about -0.38 of returns per unit of risk over similar time horizon. If you would invest 2,290 in Wei Chih Steel on September 18, 2024 and sell it today you would lose (225.00) from holding Wei Chih Steel or give up 9.83% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Hsin Kuang Steel vs. Wei Chih Steel
Performance |
Timeline |
Hsin Kuang Steel |
Wei Chih Steel |
Hsin Kuang and Wei Chih Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hsin Kuang and Wei Chih
The main advantage of trading using opposite Hsin Kuang and Wei Chih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hsin Kuang position performs unexpectedly, Wei Chih 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 Wei Chih will offset losses from the drop in Wei Chih's long position.Hsin Kuang vs. Tainan Spinning Co | Hsin Kuang vs. Lealea Enterprise Co | Hsin Kuang vs. China Petrochemical Development | Hsin Kuang vs. Ruentex Development Co |
Wei Chih vs. Chung Hung Steel | Wei Chih vs. Sheng Yu Steel | Wei Chih vs. Hsin Kuang Steel | Wei Chih vs. Tung Ho Steel |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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