Correlation Between Chung Hwa and First Insurance
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and First Insurance 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 Chung Hwa and First Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hwa Food and First Insurance Co, you can compare the effects of market volatilities on Chung Hwa and First Insurance 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 Chung Hwa with a short position of First Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and First Insurance.
Diversification Opportunities for Chung Hwa and First Insurance
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chung and First is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Food and First Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Insurance and Chung Hwa 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 Chung Hwa Food are associated (or correlated) with First Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Insurance has no effect on the direction of Chung Hwa i.e., Chung Hwa and First Insurance go up and down completely randomly.
Pair Corralation between Chung Hwa and First Insurance
Assuming the 90 days trading horizon Chung Hwa Food is expected to under-perform the First Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hwa Food is 2.19 times less risky than First Insurance. The stock trades about -0.01 of its potential returns per unit of risk. The First Insurance Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,565 in First Insurance Co on December 5, 2024 and sell it today you would earn a total of 180.00 from holding First Insurance Co or generate 7.02% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Chung Hwa Food vs. First Insurance Co
Performance |
Timeline |
Chung Hwa Food |
First Insurance |
Chung Hwa and First Insurance Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chung Hwa and First Insurance
The main advantage of trading using opposite Chung Hwa and First Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, First Insurance 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 First Insurance will offset losses from the drop in First Insurance's long position.Chung Hwa vs. Taishin Financial Holding | Chung Hwa vs. Bank of Kaohsiung | Chung Hwa vs. Sports Gear Co | Chung Hwa vs. Shin Kong Financial |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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