Correlation Between Chialin Precision and ScinoPharm Taiwan

Can any of the company-specific risk be diversified away by investing in both Chialin Precision and ScinoPharm Taiwan 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 Chialin Precision and ScinoPharm Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chialin Precision Industrial and ScinoPharm Taiwan, you can compare the effects of market volatilities on Chialin Precision and ScinoPharm Taiwan 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 Chialin Precision with a short position of ScinoPharm Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chialin Precision and ScinoPharm Taiwan.

Diversification Opportunities for Chialin Precision and ScinoPharm Taiwan

-0.8

Correlation Coefficient

Chialin Precision  ScinoPharm Taiwan

Pay attention - limited upside

The 3 months correlation between Chialin and ScinoPharm is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Chialin Precision Industrial and ScinoPharm Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScinoPharm Taiwan and Chialin Precision 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 Chialin Precision Industrial are associated (or correlated) with ScinoPharm Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScinoPharm Taiwan has no effect on the direction of Chialin Precision i.e., Chialin Precision and ScinoPharm Taiwan go up and down completely randomly.

Pair Corralation between Chialin Precision and ScinoPharm Taiwan

Assuming the 90 days trading horizon Chialin Precision Industrial is expected to generate 1.29 times more return on investment than ScinoPharm Taiwan. However, Chialin Precision is 1.29 times more volatile than ScinoPharm Taiwan. It trades about 0.1 of its potential returns per unit of risk. ScinoPharm Taiwan is currently generating about -0.02 per unit of risk. If you would invest  4,265  in Chialin Precision Industrial on October 10, 2024 and sell it today you would earn a total of  5,355  from holding Chialin Precision Industrial or generate 125.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Chialin Precision Industrial  vs.  ScinoPharm Taiwan

Chialin Precision

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chialin Precision Industrial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chialin Precision showed solid returns over the last few months and may actually be approaching a breakup point.

ScinoPharm Taiwan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ScinoPharm Taiwan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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 Chialin Precision and ScinoPharm Taiwan

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

The idea behind Chialin Precision Industrial and ScinoPharm Taiwan 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.