Correlation Between Chung Hwa and Quanta Storage

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

Diversification Opportunities for Chung Hwa and Quanta Storage

0.27

Correlation Coefficient

Chung Hwa  Quanta Storage

Modest diversification

The 3 months correlation between Chung and Quanta is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Food and Quanta Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanta Storage 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 Quanta Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanta Storage has no effect on the direction of Chung Hwa i.e., Chung Hwa and Quanta Storage go up and down completely randomly.

Pair Corralation between Chung Hwa and Quanta Storage

Assuming the 90 days trading horizon Chung Hwa Food is expected to under-perform the Quanta Storage. But the stock apears to be less risky and, when comparing its historical volatility, Chung Hwa Food is 5.44 times less risky than Quanta Storage. The stock trades about -0.04 of its potential returns per unit of risk. The Quanta Storage is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  10,550  in Quanta Storage on September 15, 2024 and sell it today you would lose (670.00) from holding Quanta Storage or give up 6.35% 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.  Quanta Storage

Chung Hwa Food

Risk-Adjusted Performance

0 of 100

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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Quanta Storage

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Quanta Storage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Quanta Storage 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 Chung Hwa and Quanta Storage

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

The idea behind Chung Hwa Food and Quanta Storage 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.