Correlation Between STL Technology and Chi Sheng

Can any of the company-specific risk be diversified away by investing in both STL Technology and Chi Sheng 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 STL Technology and Chi Sheng into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STL Technology Co and Chi Sheng Chemical, you can compare the effects of market volatilities on STL Technology and Chi Sheng 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 STL Technology with a short position of Chi Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of STL Technology and Chi Sheng.

Diversification Opportunities for STL Technology and Chi Sheng

0.89

Correlation Coefficient

STL Technology  Chi Sheng

Very poor diversification

The 3 months correlation between STL and Chi is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding STL Technology Co and Chi Sheng Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Sheng Chemical and STL Technology 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 STL Technology Co are associated (or correlated) with Chi Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Sheng Chemical has no effect on the direction of STL Technology i.e., STL Technology and Chi Sheng go up and down completely randomly.

Pair Corralation between STL Technology and Chi Sheng

Assuming the 90 days trading horizon STL Technology Co is expected to generate 4.72 times more return on investment than Chi Sheng. However, STL Technology is 4.72 times more volatile than Chi Sheng Chemical. It trades about 0.24 of its potential returns per unit of risk. Chi Sheng Chemical is currently generating about 0.14 per unit of risk. If you would invest  3,520  in STL Technology Co on October 22, 2024 and sell it today you would earn a total of  3,330  from holding STL Technology Co or generate 94.6% return on investment over 90 days.

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

STL Technology Co  vs.  Chi Sheng Chemical

STL Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in STL Technology Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, STL Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Chi Sheng Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chi Sheng Chemical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chi Sheng may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with STL Technology and Chi Sheng

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

The idea behind STL Technology Co and Chi Sheng Chemical 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.