Correlation Between ESUN Financial and Chung Hung

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

By analyzing existing cross correlation between ESUN Financial Holding and Chung Hung Steel, you can compare the effects of market volatilities on ESUN Financial and Chung Hung 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 ESUN Financial with a short position of Chung Hung. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Chung Hung.

Diversification Opportunities for ESUN Financial and Chung Hung

0.86

Correlation Coefficient

ESUN Financial  Chung Hung

Very poor diversification

The 3 months correlation between ESUN and Chung is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Chung Hung Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hung Steel and ESUN Financial 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 ESUN Financial Holding are associated (or correlated) with Chung Hung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hung Steel has no effect on the direction of ESUN Financial i.e., ESUN Financial and Chung Hung go up and down completely randomly.

Pair Corralation between ESUN Financial and Chung Hung

Assuming the 90 days trading horizon ESUN Financial is expected to generate 3.03 times less return on investment than Chung Hung. But when comparing it to its historical volatility, ESUN Financial Holding is 3.61 times less risky than Chung Hung. It trades about 0.19 of its potential returns per unit of risk. Chung Hung Steel is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,805  in Chung Hung Steel on December 22, 2024 and sell it today you would earn a total of  515.00  from holding Chung Hung Steel or generate 28.53% return on investment over 90 days.

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

ESUN Financial Holding  vs.  Chung Hung Steel

ESUN Financial Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESUN Financial Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ESUN Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Chung Hung Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chung Hung Steel are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chung Hung showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESUN Financial and Chung Hung

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

The idea behind ESUN Financial Holding and Chung Hung Steel 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.