Correlation Between Chi Sheng and Chung Hwa

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

By analyzing existing cross correlation between Chi Sheng Chemical and Chung Hwa Chemical, you can compare the effects of market volatilities on Chi Sheng and Chung 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 Chi Sheng with a short position of Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chi Sheng and Chung Hwa.

Diversification Opportunities for Chi Sheng and Chung Hwa

-0.77

Correlation Coefficient

Chi Sheng  Chung Hwa

Pay attention - limited upside

The 3 months correlation between Chi and Chung is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Chi Sheng Chemical and Chung Hwa Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Chemical and Chi Sheng 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 Chi Sheng Chemical are associated (or correlated) with Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Chemical has no effect on the direction of Chi Sheng i.e., Chi Sheng and Chung Hwa go up and down completely randomly.

Pair Corralation between Chi Sheng and Chung Hwa

Assuming the 90 days trading horizon Chi Sheng Chemical is expected to generate 0.72 times more return on investment than Chung Hwa. However, Chi Sheng Chemical is 1.39 times less risky than Chung Hwa. It trades about 0.08 of its potential returns per unit of risk. Chung Hwa Chemical is currently generating about -0.13 per unit of risk. If you would invest  2,760  in Chi Sheng Chemical on December 2, 2024 and sell it today you would earn a total of  140.00  from holding Chi Sheng Chemical or generate 5.07% return on investment over 90 days.

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

Chi Sheng Chemical  vs.  Chung Hwa Chemical

Chi Sheng Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chi Sheng Chemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chi Sheng is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chung Hwa Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chung Hwa Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Chi Sheng and Chung Hwa

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

The idea behind Chi Sheng Chemical and Chung Hwa Chemical 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.