Correlation Between U Ming and Chi Sheng

Can any of the company-specific risk be diversified away by investing in both U Ming and Chi Sheng 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 U Ming and Chi Sheng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between U Ming Marine Transport and Chi Sheng Chemical, you can compare the effects of market volatilities on U Ming and Chi Sheng 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 U Ming with a short position of Chi Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and Chi Sheng.

Diversification Opportunities for U Ming and Chi Sheng

0.71

Correlation Coefficient

U Ming  Chi Sheng

Poor diversification

The 3 months correlation between 2606 and Chi is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Chi Sheng Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Sheng Chemical and U Ming 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 U Ming Marine Transport are associated (or correlated) with Chi Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Sheng Chemical has no effect on the direction of U Ming i.e., U Ming and Chi Sheng go up and down completely randomly.

Pair Corralation between U Ming and Chi Sheng

Assuming the 90 days trading horizon U Ming Marine Transport is expected to generate 2.46 times more return on investment than Chi Sheng. However, U Ming is 2.46 times more volatile than Chi Sheng Chemical. It trades about 0.17 of its potential returns per unit of risk. Chi Sheng Chemical is currently generating about 0.14 per unit of risk. If you would invest  5,380  in U Ming Marine Transport on December 22, 2024 and sell it today you would earn a total of  1,720  from holding U Ming Marine Transport or generate 31.97% return on investment over 90 days.

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

U Ming Marine Transport  vs.  Chi Sheng Chemical

U Ming Marine

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming showed solid returns over the last few months and may actually be approaching a breakup point.

Chi Sheng Chemical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chi Sheng Chemical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chi Sheng may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with U Ming and Chi Sheng

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

The idea behind U Ming Marine Transport and Chi Sheng Chemical 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.