Correlation Between Chi Sheng and Asmedia Technology

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

Diversification Opportunities for Chi Sheng and Asmedia Technology

0.75

Correlation Coefficient

Chi Sheng  Asmedia Technology

Poor diversification

The 3 months correlation between Chi and Asmedia is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Chi Sheng Chemical and Asmedia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asmedia Technology 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 Asmedia Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asmedia Technology has no effect on the direction of Chi Sheng i.e., Chi Sheng and Asmedia Technology go up and down completely randomly.

Pair Corralation between Chi Sheng and Asmedia Technology

Assuming the 90 days trading horizon Chi Sheng is expected to generate 2.56 times less return on investment than Asmedia Technology. But when comparing it to its historical volatility, Chi Sheng Chemical is 2.14 times less risky than Asmedia Technology. It trades about 0.1 of its potential returns per unit of risk. Asmedia Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  188,500  in Asmedia Technology on October 10, 2024 and sell it today you would earn a total of  13,500  from holding Asmedia Technology or generate 7.16% return on investment over 90 days.

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

Chi Sheng Chemical  vs.  Asmedia Technology

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.

Asmedia Technology

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asmedia Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asmedia Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chi Sheng and Asmedia Technology

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

The idea behind Chi Sheng Chemical and Asmedia Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.