Correlation Between Pacific Hospital and Chi Sheng

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

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

Diversification Opportunities for Pacific Hospital and Chi Sheng

0.7

Correlation Coefficient

Pacific Hospital  Chi Sheng

Poor diversification

The 3 months correlation between Pacific and Chi is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Hospital Supply and Chi Sheng Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Sheng Chemical and Pacific Hospital 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 Pacific Hospital Supply are associated (or correlated) with Chi Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Sheng Chemical has no effect on the direction of Pacific Hospital i.e., Pacific Hospital and Chi Sheng go up and down completely randomly.

Pair Corralation between Pacific Hospital and Chi Sheng

Assuming the 90 days trading horizon Pacific Hospital Supply is expected to generate 0.62 times more return on investment than Chi Sheng. However, Pacific Hospital Supply is 1.6 times less risky than Chi Sheng. It trades about 0.06 of its potential returns per unit of risk. Chi Sheng Chemical is currently generating about -0.02 per unit of risk. If you would invest  8,669  in Pacific Hospital Supply on September 14, 2024 and sell it today you would earn a total of  501.00  from holding Pacific Hospital Supply or generate 5.78% return on investment over 90 days.

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

Pacific Hospital Supply  vs.  Chi Sheng Chemical

Pacific Hospital Supply

Risk-Adjusted Performance

6 of 100

Modest

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

Chi Sheng Chemical

Risk-Adjusted Performance

9 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chi Sheng Chemical are ranked lower than 9 (%) 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.

Pair Trading with Pacific Hospital and Chi Sheng

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

The idea behind Pacific Hospital Supply and Chi Sheng 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.