Correlation Between Cheng Shin and Nien Hsing

Can any of the company-specific risk be diversified away by investing in both Cheng Shin and Nien Hsing 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 Cheng Shin and Nien Hsing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cheng Shin Rubber and Nien Hsing Textile, you can compare the effects of market volatilities on Cheng Shin and Nien Hsing 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 Cheng Shin with a short position of Nien Hsing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Shin and Nien Hsing.

Diversification Opportunities for Cheng Shin and Nien Hsing

0.46

Correlation Coefficient

Cheng Shin  Nien Hsing

Very weak diversification

The 3 months correlation between Cheng and Nien is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Nien Hsing Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nien Hsing Textile and Cheng Shin 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 Cheng Shin Rubber are associated (or correlated) with Nien Hsing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nien Hsing Textile has no effect on the direction of Cheng Shin i.e., Cheng Shin and Nien Hsing go up and down completely randomly.

Pair Corralation between Cheng Shin and Nien Hsing

Assuming the 90 days trading horizon Cheng Shin Rubber is expected to generate 2.64 times more return on investment than Nien Hsing. However, Cheng Shin is 2.64 times more volatile than Nien Hsing Textile. It trades about 0.02 of its potential returns per unit of risk. Nien Hsing Textile is currently generating about 0.01 per unit of risk. If you would invest  4,860  in Cheng Shin Rubber on September 22, 2024 and sell it today you would earn a total of  95.00  from holding Cheng Shin Rubber or generate 1.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Cheng Shin Rubber  vs.  Nien Hsing Textile

Cheng Shin Rubber

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Shin Rubber are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Cheng Shin is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Nien Hsing Textile

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nien Hsing Textile are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Nien Hsing is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Cheng Shin and Nien Hsing

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

The idea behind Cheng Shin Rubber and Nien Hsing Textile 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..