Correlation Between Cheng Uei and Chien Kuo

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

By analyzing existing cross correlation between Cheng Uei Precision and Chien Kuo Construction, you can compare the effects of market volatilities on Cheng Uei and Chien Kuo 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 Uei with a short position of Chien Kuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Uei and Chien Kuo.

Diversification Opportunities for Cheng Uei and Chien Kuo

-0.75

Correlation Coefficient

Cheng Uei  Chien Kuo

Pay attention - limited upside

The 3 months correlation between Cheng and Chien is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Uei Precision and Chien Kuo Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chien Kuo Construction and Cheng Uei 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 Uei Precision are associated (or correlated) with Chien Kuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chien Kuo Construction has no effect on the direction of Cheng Uei i.e., Cheng Uei and Chien Kuo go up and down completely randomly.

Pair Corralation between Cheng Uei and Chien Kuo

Assuming the 90 days trading horizon Cheng Uei Precision is expected to under-perform the Chien Kuo. In addition to that, Cheng Uei is 1.15 times more volatile than Chien Kuo Construction. It trades about -0.16 of its total potential returns per unit of risk. Chien Kuo Construction is currently generating about 0.19 per unit of volatility. If you would invest  2,700  in Chien Kuo Construction on December 22, 2024 and sell it today you would earn a total of  460.00  from holding Chien Kuo Construction or generate 17.04% return on investment over 90 days.

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

Cheng Uei Precision  vs.  Chien Kuo Construction

Cheng Uei Precision

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cheng Uei Precision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Chien Kuo Construction

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chien Kuo Construction are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chien Kuo showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheng Uei and Chien Kuo

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

The idea behind Cheng Uei Precision and Chien Kuo Construction 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.