Correlation Between Sinopac Financial and Chang Hwa

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

By analyzing existing cross correlation between Sinopac Financial Holdings and Chang Hwa Commercial, you can compare the effects of market volatilities on Sinopac Financial and Chang Hwa 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 Sinopac Financial with a short position of Chang Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinopac Financial and Chang Hwa.

Diversification Opportunities for Sinopac Financial and Chang Hwa

-0.2

Correlation Coefficient

Sinopac Financial  Chang Hwa

Good diversification

The 3 months correlation between Sinopac and Chang is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sinopac Financial Holdings and Chang Hwa Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chang Hwa Commercial and Sinopac 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 Sinopac Financial Holdings are associated (or correlated) with Chang Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chang Hwa Commercial has no effect on the direction of Sinopac Financial i.e., Sinopac Financial and Chang Hwa go up and down completely randomly.

Pair Corralation between Sinopac Financial and Chang Hwa

Assuming the 90 days trading horizon Sinopac Financial Holdings is expected to under-perform the Chang Hwa. In addition to that, Sinopac Financial is 1.49 times more volatile than Chang Hwa Commercial. It trades about -0.07 of its total potential returns per unit of risk. Chang Hwa Commercial is currently generating about -0.01 per unit of volatility. If you would invest  1,800  in Chang Hwa Commercial on December 30, 2024 and sell it today you would lose (5.00) from holding Chang Hwa Commercial or give up 0.28% of portfolio value over 90 days.

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

Sinopac Financial Holdings  vs.  Chang Hwa Commercial

Sinopac Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinopac Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sinopac Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chang Hwa Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chang Hwa Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chang Hwa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Sinopac Financial and Chang Hwa

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

The idea behind Sinopac Financial Holdings and Chang Hwa Commercial 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.