Correlation Between Chung Hwa and Chung Lien
Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Chung Lien 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 Chung Lien 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 Chung Lien Transportation, you can compare the effects of market volatilities on Chung Hwa and Chung Lien 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 Chung Lien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Chung Lien.
Diversification Opportunities for Chung Hwa and Chung Lien
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Chung and Chung is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Food and Chung Lien Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Lien Transportation 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 Chung Lien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Lien Transportation has no effect on the direction of Chung Hwa i.e., Chung Hwa and Chung Lien go up and down completely randomly.
Pair Corralation between Chung Hwa and Chung Lien
Assuming the 90 days trading horizon Chung Hwa Food is expected to under-perform the Chung Lien. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hwa Food is 1.67 times less risky than Chung Lien. The stock trades about -0.22 of its potential returns per unit of risk. The Chung Lien Transportation is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 4,205 in Chung Lien Transportation on October 9, 2024 and sell it today you would lose (10.00) from holding Chung Lien Transportation or give up 0.24% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Chung Hwa Food vs. Chung Lien Transportation
Performance |
Timeline |
Chung Hwa Food |
Chung Lien Transportation |
Chung Hwa and Chung Lien Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chung Hwa and Chung Lien
The main advantage of trading using opposite Chung Hwa and Chung Lien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hwa position performs unexpectedly, Chung Lien 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 Chung Lien will offset losses from the drop in Chung Lien's long position.Chung Hwa vs. Adata Technology Co | Chung Hwa vs. Dynamic Medical Technologies | Chung Hwa vs. Chinese Maritime Transport | Chung Hwa vs. Trade Van Information Services |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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