Correlation Between Chi Sheng and Pegavision

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

Diversification Opportunities for Chi Sheng and Pegavision

-0.62

Correlation Coefficient

Chi Sheng  Pegavision

Excellent diversification

The 3 months correlation between Chi and Pegavision is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chi Sheng Chemical and Pegavision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pegavision 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 Pegavision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pegavision has no effect on the direction of Chi Sheng i.e., Chi Sheng and Pegavision go up and down completely randomly.

Pair Corralation between Chi Sheng and Pegavision

Assuming the 90 days trading horizon Chi Sheng Chemical is expected to generate 0.5 times more return on investment than Pegavision. However, Chi Sheng Chemical is 2.01 times less risky than Pegavision. It trades about 0.13 of its potential returns per unit of risk. Pegavision is currently generating about -0.15 per unit of risk. If you would invest  2,615  in Chi Sheng Chemical on September 24, 2024 and sell it today you would earn a total of  175.00  from holding Chi Sheng Chemical or generate 6.69% 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.  Pegavision

Chi Sheng Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chi Sheng Chemical are ranked lower than 10 (%) 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 January 2025.

Pegavision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pegavision 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 January 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 Pegavision

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

The idea behind Chi Sheng Chemical and Pegavision 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.