Correlation Between Cheng Shin and Ability Enterprise

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

Diversification Opportunities for Cheng Shin and Ability Enterprise

0.06

Correlation Coefficient

Cheng Shin  Ability Enterprise

Significant diversification

The 3 months correlation between Cheng and Ability is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Ability Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ability Enterprise 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 Ability Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ability Enterprise has no effect on the direction of Cheng Shin i.e., Cheng Shin and Ability Enterprise go up and down completely randomly.

Pair Corralation between Cheng Shin and Ability Enterprise

Assuming the 90 days trading horizon Cheng Shin is expected to generate 2.92 times less return on investment than Ability Enterprise. But when comparing it to its historical volatility, Cheng Shin Rubber is 1.67 times less risky than Ability Enterprise. It trades about 0.06 of its potential returns per unit of risk. Ability Enterprise Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,035  in Ability Enterprise Co on September 26, 2024 and sell it today you would earn a total of  4,345  from holding Ability Enterprise Co or generate 213.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Cheng Shin Rubber  vs.  Ability Enterprise Co

Cheng Shin Rubber

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Shin Rubber are ranked lower than 2 (%) 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.

Ability Enterprise

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ability Enterprise Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ability Enterprise showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheng Shin and Ability Enterprise

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

The idea behind Cheng Shin Rubber and Ability Enterprise Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.