Correlation Between Cheng Shin and Hsin Yung

Can any of the company-specific risk be diversified away by investing in both Cheng Shin and Hsin Yung 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 Hsin Yung 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 Hsin Yung Chien, you can compare the effects of market volatilities on Cheng Shin and Hsin Yung 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 Hsin Yung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Shin and Hsin Yung.

Diversification Opportunities for Cheng Shin and Hsin Yung

0.36

Correlation Coefficient

Cheng Shin  Hsin Yung

Weak diversification

The 3 months correlation between Cheng and Hsin is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Hsin Yung Chien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Yung Chien 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 Hsin Yung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Yung Chien has no effect on the direction of Cheng Shin i.e., Cheng Shin and Hsin Yung go up and down completely randomly.

Pair Corralation between Cheng Shin and Hsin Yung

Assuming the 90 days trading horizon Cheng Shin Rubber is expected to under-perform the Hsin Yung. In addition to that, Cheng Shin is 3.75 times more volatile than Hsin Yung Chien. It trades about -0.03 of its total potential returns per unit of risk. Hsin Yung Chien is currently generating about -0.06 per unit of volatility. If you would invest  9,600  in Hsin Yung Chien on October 3, 2024 and sell it today you would lose (200.00) from holding Hsin Yung Chien or give up 2.08% of portfolio value over 90 days.

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

Cheng Shin Rubber  vs.  Hsin Yung Chien

Cheng Shin Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheng Shin Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Hsin Yung Chien

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hsin Yung Chien has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hsin Yung 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 Hsin Yung

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

The idea behind Cheng Shin Rubber and Hsin Yung Chien 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.