Correlation Between Tze Shin and Cheng Uei

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

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

Diversification Opportunities for Tze Shin and Cheng Uei

-0.27

Correlation Coefficient

Tze Shin  Cheng Uei

Very good diversification

The 3 months correlation between Tze and Cheng is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Tze Shin International and Cheng Uei Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Uei Precision and Tze 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 Tze Shin International are associated (or correlated) with Cheng Uei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Uei Precision has no effect on the direction of Tze Shin i.e., Tze Shin and Cheng Uei go up and down completely randomly.

Pair Corralation between Tze Shin and Cheng Uei

Assuming the 90 days trading horizon Tze Shin International is expected to generate 0.75 times more return on investment than Cheng Uei. However, Tze Shin International is 1.33 times less risky than Cheng Uei. It trades about 0.07 of its potential returns per unit of risk. Cheng Uei Precision is currently generating about -0.15 per unit of risk. If you would invest  2,175  in Tze Shin International on December 21, 2024 and sell it today you would earn a total of  95.00  from holding Tze Shin International or generate 4.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Tze Shin International  vs.  Cheng Uei Precision

Tze Shin International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tze Shin International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Tze Shin is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Tze Shin and Cheng Uei

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

The idea behind Tze Shin International and Cheng Uei Precision 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.