Correlation Between Wha Yu and Chialin Precision

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

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

Diversification Opportunities for Wha Yu and Chialin Precision

0.08

Correlation Coefficient

Wha Yu  Chialin Precision

Significant diversification

The 3 months correlation between Wha and Chialin is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Wha Yu Industrial and Chialin Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chialin Precision and Wha Yu 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 Wha Yu Industrial are associated (or correlated) with Chialin Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chialin Precision has no effect on the direction of Wha Yu i.e., Wha Yu and Chialin Precision go up and down completely randomly.

Pair Corralation between Wha Yu and Chialin Precision

Assuming the 90 days trading horizon Wha Yu Industrial is expected to under-perform the Chialin Precision. In addition to that, Wha Yu is 1.54 times more volatile than Chialin Precision Industrial. It trades about -0.05 of its total potential returns per unit of risk. Chialin Precision Industrial is currently generating about -0.05 per unit of volatility. If you would invest  9,250  in Chialin Precision Industrial on December 22, 2024 and sell it today you would lose (300.00) from holding Chialin Precision Industrial or give up 3.24% of portfolio value over 90 days.

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

Wha Yu Industrial  vs.  Chialin Precision Industrial

Wha Yu Industrial

Risk-Adjusted Performance

Very Weak

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

Chialin Precision

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chialin Precision Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chialin Precision 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 Wha Yu and Chialin Precision

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

The idea behind Wha Yu Industrial and Chialin Precision Industrial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.