Correlation Between Da Cin and Chung Hsin

Can any of the company-specific risk be diversified away by investing in both Da Cin and Chung Hsin 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 Da Cin and Chung Hsin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Da Cin Construction Co and Chung Hsin Electric Machinery, you can compare the effects of market volatilities on Da Cin and Chung Hsin 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 Da Cin with a short position of Chung Hsin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Da Cin and Chung Hsin.

Diversification Opportunities for Da Cin and Chung Hsin

-0.61

Correlation Coefficient

Da Cin  Chung Hsin

Excellent diversification

The 3 months correlation between 2535 and Chung is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Da Cin Construction Co and Chung Hsin Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hsin Electric and Da Cin 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 Da Cin Construction Co are associated (or correlated) with Chung Hsin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hsin Electric has no effect on the direction of Da Cin i.e., Da Cin and Chung Hsin go up and down completely randomly.

Pair Corralation between Da Cin and Chung Hsin

Assuming the 90 days trading horizon Da Cin Construction Co is expected to generate 0.54 times more return on investment than Chung Hsin. However, Da Cin Construction Co is 1.84 times less risky than Chung Hsin. It trades about 0.15 of its potential returns per unit of risk. Chung Hsin Electric Machinery is currently generating about -0.19 per unit of risk. If you would invest  5,300  in Da Cin Construction Co on October 22, 2024 and sell it today you would earn a total of  100.00  from holding Da Cin Construction Co or generate 1.89% return on investment over 90 days.

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

Da Cin Construction Co  vs.  Chung Hsin Electric Machinery

Da Cin Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Da Cin Construction Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Da Cin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chung Hsin Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Hsin Electric Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Da Cin and Chung Hsin

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

The idea behind Da Cin Construction Co and Chung Hsin Electric Machinery 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.