Correlation Between Chialin Precision and ReaLy Development

Can any of the company-specific risk be diversified away by investing in both Chialin Precision and ReaLy Development 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 ReaLy Development 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 ReaLy Development Construction, you can compare the effects of market volatilities on Chialin Precision and ReaLy Development 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 ReaLy Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chialin Precision and ReaLy Development.

Diversification Opportunities for Chialin Precision and ReaLy Development

0.7

Correlation Coefficient

Chialin Precision  ReaLy Development

Poor diversification

The 3 months correlation between Chialin and ReaLy is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Chialin Precision Industrial and ReaLy Development Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ReaLy Development 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 ReaLy Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ReaLy Development has no effect on the direction of Chialin Precision i.e., Chialin Precision and ReaLy Development go up and down completely randomly.

Pair Corralation between Chialin Precision and ReaLy Development

Assuming the 90 days trading horizon Chialin Precision Industrial is expected to under-perform the ReaLy Development. But the stock apears to be less risky and, when comparing its historical volatility, Chialin Precision Industrial is 1.4 times less risky than ReaLy Development. The stock trades about -0.06 of its potential returns per unit of risk. The ReaLy Development Construction is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,095  in ReaLy Development Construction on October 25, 2024 and sell it today you would lose (20.00) from holding ReaLy Development Construction or give up 0.49% of portfolio value over 90 days.

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

Chialin Precision Industrial  vs.  ReaLy Development Construction

Chialin Precision

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chialin Precision Industrial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chialin Precision may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ReaLy Development

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ReaLy Development Construction are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ReaLy Development showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chialin Precision and ReaLy Development

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

The idea behind Chialin Precision Industrial and ReaLy Development Construction 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.