Correlation Between Chaheng Precision and Phison Electronics

Can any of the company-specific risk be diversified away by investing in both Chaheng Precision and Phison Electronics 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 Chaheng Precision and Phison Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chaheng Precision Co and Phison Electronics, you can compare the effects of market volatilities on Chaheng Precision and Phison Electronics 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 Chaheng Precision with a short position of Phison Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chaheng Precision and Phison Electronics.

Diversification Opportunities for Chaheng Precision and Phison Electronics

0.09

Correlation Coefficient

Chaheng Precision  Phison Electronics

Significant diversification

The 3 months correlation between Chaheng and Phison is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Chaheng Precision Co and Phison Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phison Electronics and Chaheng Precision 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 Chaheng Precision Co are associated (or correlated) with Phison Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phison Electronics has no effect on the direction of Chaheng Precision i.e., Chaheng Precision and Phison Electronics go up and down completely randomly.

Pair Corralation between Chaheng Precision and Phison Electronics

Assuming the 90 days trading horizon Chaheng Precision Co is expected to under-perform the Phison Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Chaheng Precision Co is 1.33 times less risky than Phison Electronics. The stock trades about -0.08 of its potential returns per unit of risk. The Phison Electronics is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  47,100  in Phison Electronics on September 23, 2024 and sell it today you would lose (700.00) from holding Phison Electronics or give up 1.49% of portfolio value over 90 days.

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

Chaheng Precision Co  vs.  Phison Electronics

Chaheng Precision

Risk-Adjusted Performance

0 of 100

Very Weak

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

Phison Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phison Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Phison Electronics 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 Chaheng Precision and Phison Electronics

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

The idea behind Chaheng Precision Co and Phison Electronics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.