Correlation Between Chia Yi and Great Computer

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

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

Diversification Opportunities for Chia Yi and Great Computer

0.52

Correlation Coefficient

Chia Yi  Great Computer

Very weak diversification

The 3 months correlation between Chia and Great is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Chia Yi Steel and Great Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Computer and Chia Yi 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 Chia Yi Steel are associated (or correlated) with Great Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Computer has no effect on the direction of Chia Yi i.e., Chia Yi and Great Computer go up and down completely randomly.

Pair Corralation between Chia Yi and Great Computer

Assuming the 90 days trading horizon Chia Yi is expected to generate 2.7 times less return on investment than Great Computer. But when comparing it to its historical volatility, Chia Yi Steel is 1.14 times less risky than Great Computer. It trades about 0.05 of its potential returns per unit of risk. Great Computer is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,585  in Great Computer on September 16, 2024 and sell it today you would earn a total of  460.00  from holding Great Computer or generate 29.02% return on investment over 90 days.

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

Chia Yi Steel  vs.  Great Computer

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.

Great Computer

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Computer are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Great Computer showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chia Yi and Great Computer

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

The idea behind Chia Yi Steel and Great Computer 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.