Correlation Between Chung Hwa and Trade Van

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

Diversification Opportunities for Chung Hwa and Trade Van

-0.36

Correlation Coefficient

Chung Hwa  Trade Van

Very good diversification

The 3 months correlation between Chung and Trade is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Food and Trade Van Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Van Information 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 Trade Van. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Van Information has no effect on the direction of Chung Hwa i.e., Chung Hwa and Trade Van go up and down completely randomly.

Pair Corralation between Chung Hwa and Trade Van

Assuming the 90 days trading horizon Chung Hwa Food is expected to under-perform the Trade Van. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hwa Food is 4.1 times less risky than Trade Van. The stock trades about -0.01 of its potential returns per unit of risk. The Trade Van Information Services is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,100  in Trade Van Information Services on December 4, 2024 and sell it today you would earn a total of  1,170  from holding Trade Van Information Services or generate 14.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Chung Hwa Food  vs.  Trade Van Information Services

Chung Hwa Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chung Hwa Food has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Hwa is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Trade Van Information

Risk-Adjusted Performance

OK

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

Pair Trading with Chung Hwa and Trade Van

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

The idea behind Chung Hwa Food and Trade Van Information Services 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.