Correlation Between Cheng Shin and Paiho Shih

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

Diversification Opportunities for Cheng Shin and Paiho Shih

-0.26

Correlation Coefficient

Cheng Shin  Paiho Shih

Very good diversification

The 3 months correlation between Cheng and Paiho is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Paiho Shih Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paiho Shih Holdings 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 Paiho Shih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paiho Shih Holdings has no effect on the direction of Cheng Shin i.e., Cheng Shin and Paiho Shih go up and down completely randomly.

Pair Corralation between Cheng Shin and Paiho Shih

Assuming the 90 days trading horizon Cheng Shin Rubber is expected to generate 0.92 times more return on investment than Paiho Shih. However, Cheng Shin Rubber is 1.08 times less risky than Paiho Shih. It trades about 0.1 of its potential returns per unit of risk. Paiho Shih Holdings is currently generating about -0.16 per unit of risk. If you would invest  4,640  in Cheng Shin Rubber on September 27, 2024 and sell it today you would earn a total of  460.00  from holding Cheng Shin Rubber or generate 9.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

Cheng Shin Rubber  vs.  Paiho Shih Holdings

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.

Paiho Shih Holdings

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Cheng Shin and Paiho Shih

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

The idea behind Cheng Shin Rubber and Paiho Shih Holdings 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.