Correlation Between Chi Sheng and Hsinli Chemical

Can any of the company-specific risk be diversified away by investing in both Chi Sheng and Hsinli Chemical 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 Hsinli Chemical 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 Hsinli Chemical Industrial, you can compare the effects of market volatilities on Chi Sheng and Hsinli Chemical 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 Hsinli Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chi Sheng and Hsinli Chemical.

Diversification Opportunities for Chi Sheng and Hsinli Chemical

0.42

Correlation Coefficient

Chi Sheng  Hsinli Chemical

Very weak diversification

The 3 months correlation between Chi and Hsinli is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Chi Sheng Chemical and Hsinli Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsinli Chemical Indu 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 Hsinli Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsinli Chemical Indu has no effect on the direction of Chi Sheng i.e., Chi Sheng and Hsinli Chemical go up and down completely randomly.

Pair Corralation between Chi Sheng and Hsinli Chemical

Assuming the 90 days trading horizon Chi Sheng Chemical is expected to generate 0.63 times more return on investment than Hsinli Chemical. However, Chi Sheng Chemical is 1.59 times less risky than Hsinli Chemical. It trades about 0.1 of its potential returns per unit of risk. Hsinli Chemical Industrial is currently generating about -0.1 per unit of risk. If you would invest  2,765  in Chi Sheng Chemical on October 10, 2024 and sell it today you would earn a total of  80.00  from holding Chi Sheng Chemical or generate 2.89% return on investment over 90 days.

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

Chi Sheng Chemical  vs.  Hsinli Chemical Industrial

Chi Sheng Chemical

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chi Sheng Chemical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chi Sheng may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hsinli Chemical Indu

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hsinli Chemical Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hsinli Chemical 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 Chi Sheng and Hsinli Chemical

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

The idea behind Chi Sheng Chemical and Hsinli Chemical 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.