Correlation Between Cheng Uei and Shih Wei

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

Diversification Opportunities for Cheng Uei and Shih Wei

-0.4

Correlation Coefficient

Cheng Uei  Shih Wei

Very good diversification

The 3 months correlation between Cheng and Shih is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Uei Precision and Shih Wei Navigation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shih Wei Navigation 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 Shih Wei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shih Wei Navigation has no effect on the direction of Cheng Uei i.e., Cheng Uei and Shih Wei go up and down completely randomly.

Pair Corralation between Cheng Uei and Shih Wei

Assuming the 90 days trading horizon Cheng Uei Precision is expected to under-perform the Shih Wei. But the stock apears to be less risky and, when comparing its historical volatility, Cheng Uei Precision is 1.52 times less risky than Shih Wei. The stock trades about -0.16 of its potential returns per unit of risk. The Shih Wei Navigation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,685  in Shih Wei Navigation on December 22, 2024 and sell it today you would earn a total of  335.00  from holding Shih Wei Navigation or generate 19.88% return on investment over 90 days.

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

Cheng Uei Precision  vs.  Shih Wei Navigation

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 abnormal 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.

Shih Wei Navigation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shih Wei Navigation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Shih Wei showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheng Uei and Shih Wei

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

The idea behind Cheng Uei Precision and Shih Wei Navigation 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.