Correlation Between Cheng Shin and Giant Manufacturing

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

Diversification Opportunities for Cheng Shin and Giant Manufacturing

0.42

Correlation Coefficient

Cheng Shin  Giant Manufacturing

Very weak diversification

The 3 months correlation between Cheng and Giant is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber and Giant Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giant Manufacturing 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 Giant Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giant Manufacturing has no effect on the direction of Cheng Shin i.e., Cheng Shin and Giant Manufacturing go up and down completely randomly.

Pair Corralation between Cheng Shin and Giant Manufacturing

Assuming the 90 days trading horizon Cheng Shin is expected to generate 2.46 times less return on investment than Giant Manufacturing. But when comparing it to its historical volatility, Cheng Shin Rubber is 1.77 times less risky than Giant Manufacturing. It trades about 0.01 of its potential returns per unit of risk. Giant Manufacturing Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14,300  in Giant Manufacturing Co on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Giant Manufacturing Co or generate 0.7% return on investment over 90 days.

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

Cheng Shin Rubber  vs.  Giant Manufacturing Co

Cheng Shin Rubber

Risk-Adjusted Performance

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.

Giant Manufacturing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Giant Manufacturing Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Giant Manufacturing 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 Giant Manufacturing

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

The idea behind Cheng Shin Rubber and Giant Manufacturing 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..